It isn’t going to help with the cost of living, but Ofwat’s decision to allow water companies to raise bills by an average of £157 (36 per cent) over the next five years is absolutely necessary. Yes, some companies like Thames Water have loaded themselves up with debt to pay their owners handsome dividends – and may yet go bust as a result. But looking overall at the UK water industry we have been underinvesting for decades. If we want to reliable water supply, and a wastewater treatment system which does not involve the routine dumping of sewage into rivers and the sea, we are going to have to pay for it.
Look around Britain and you can find some impressive water infrastructure, from the Ladybower reservoir system in Derbyshire to the largely unseen sewers of London. But it almost all has one thing in common: it predates the past 40 years. Much of it is Victorian. No major reservoir has been completed since the late Queen opened Kielder Water in 1981. Our water industry has instead been incentivised to sweat its assets, controlling demand through crude means such as hosepipe bans and campaigns in school for kids not to run the tap while they brush their teeth. As for sewage, that is a more miserable story still. Rather than invest in the renewal of sewers, water companies have chosen the easy way out: diverting more and more sewage into rivers. The fines have turned out to be cheaper than the investment required to avert the discharges.
Impressive though our Victorian sewers were, they were built with a fatal design error: they combined foul sewage, from houses, with storm drainage: run-off from the streets. During times of high rainfall the sewers cannot cope and so sewage is released raw into rivers to prevent it backing up into people’s homes. However forward-thinking they may have been, Victorian engineers couldn’t have been expected to plan for the vast growth of the population during the 20th century nor the emergence of power showers, washing machines and everything else which adds to water discharge.
Undoing this error will be fantastically expensive. In 2021, Water UK, the industry trade body, suggested that it would cost between £350 billion and £600 billion fully to separate foul and storm draining, adding between £569 and £999 to bills while the work was undertaken. There are cheaper options which would reduce (if not eliminate entirely) sewage discharges. But it all has to be paid for, and it is water customers – i.e. all of us – who will have to pay.
For all this, Ofwat’s decision puts huge pressure on the government. Labour came to office accusing the Conservatives of generating a cost-of-living crisis and promising to put things right. It even promised us cheaper energy bills to the tune of £300 a year. Yet rising water bills are going to hit some households heavily. With latest figures showing inflation rising to 2.6 per cent, there is little sign of any immediate relief in the cost of living. Moreover, Ed Miliband’s promise of cheaper electricity bills thanks to his decarbonisation policies is looking more foolish by the day, as it emerges just how expensive the required investment will be. I suspect we haven’t yet heard the end of the cost-of-living crisis.
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