The average household water and sewerage bill in England and Wales will rise by 3.5 per cent over the next year, the regulator said today.
Households will pay an average of £388 from April this year to March 2014, 0.5 per cent above the rate of inflation.
The higher rates will come into effect on April 1 and apply until March 31, 2014.
The cost to consumers will vary depending on the water company that supplies them and whether they have a water meter.
Regina Finn, chief executive of Ofwat, said that any increase was unwelcome when household incomes were under acute pressure but that the rise would help to pay for £25 billion of investment between 2010 and 2015.
“This will deliver real benefits, from continuing to improve the reliability of supplies to dealing with the misery of sewer flooding for thousands of customers,” she said.
Ofwat would take action if water companies did not deliver on investment, Ms Finn added.
Last year, Ofwat tried to shake up the water customer pricing regime by announcing proposals to make price-setting more flexible.
However, the supply companies rejected the regulator’s attempt to break a “plus inflation” pricing regime.
Ofwat was forced to back down just before Christmas and said that its reforms remained goals, but that it did not plan to implement them as soon as possible.
Heidi Mottram, the chief executive of Northumbrian Water, told Ofwat last year: “We feel there may have been a better way to underline the commitment to a constructive working relationship.”
Richard Wellings, deputy editorial director at the Institute of Economic Affairs, said: “Over-regulation is the main factor driving up prices. Ever-increasing environmental and water quality standards, many resulting from EU directives, have forced companies to invest tens of billions in new infrastructure and pass on the cost to consumers.
“The Government should take a new approach to the water sector that focuses on keeping bills down. It should end the obsession with ever-increasing water quality and environmental standards and exert pressure on EU policymakers to do likewise. Removing barriers to competition in the water industry would also help consumers.”
Last week MPs called on the Government to break up regional water monopolies in an attempt to fast-track competition.
The call came in a report from the House of Commons Environment Select Committee, which urges Defra to be far bolder in the draft Water Bill going through Parliament.
The MPs have called on the department to drive through the biggest shake-up in water since privatisation more than 20 years ago by re-engineering its structures more in line with the energy industry.
In a key recommendation, they say that the water companies should be forced to separate their wholesale operations — sourcing water, treating it and distributing it through the pipes — from their retail divisions dealing with customer bills and metering.
In the energy industry, power generation was separated from the mains network, which was separated from the regional household suppliers.
The committee further states that incumbent regional water companies should be allowed to decide whether they wish to exit from retail operations altogether and concentrate on being an upstream infrastructure utility.
The chairman of Barclays does not yet have the confidence of the Parliamentary Banking Commission, the chairman of the panel suggested today, on a day when the bank set aside another billion pounds for the mis-selling of payment protection insurance and other products.
Andrew Tyrie refused an invitation by Sir David Walker to endorse his judgment, in a bruising and tetchy session with the bank’s top executives, which underlines the challenge they face in overhauling Barclays’ corporate reputation.
At the end of the two-and-a-half-hour session, there was an awkward exchange between Mr Tyrie, the chairman of the commission, and Sir David.
The bank chief asked whether Mr Tyrie “was questioning my judgment”, and the MP replied that he was “reserving judgment”.
Afterwards, some members of the commission expressed surprise at how poorly they believed the Barclays executives had performed and suggested that the exchange in which Mr Tyrie declined to endorse Sir David’s judgment was a “significant moment”.
The session underlined the challenge faced by Barclays in its attempts to show that it has changed its culture and mended its ways since the Libor scandal.
MPs and peers repeatedly questioned whether warm words were being backed up by actions.
Antony Jenkins, who was appointed chief executive seven months ago, was asked why he did not resign after mis-selling PPI for three years when he was head of Barclaycard, given his assertions that he holds himself to a higher standard.
He replied that he did not resign because of “proportionality”.
Sir David, the Barclays chairman, repeatedly refused to condemn the head of the remuneration committee, which defended awarding a multimillion-pound bonus to Bob Diamond last year.
Sir John Sunderland, the bank’s present remuneration chief, surprised the commission in last week’s hearing when he said that Mr Diamond was right to receive a bonus for 2011, although he said that it could have been reduced.
When questioned over the 2011 bonus decision, Sir David said today: “I’m not interested in the mistakes of the past.”
Meanwhile, Mr Jenkins appeared to reveal that Barclays did commission a report into last year’s Libor scandal, even though the bank said recently in court that no such thing existed.
Mr Jenkins said that Clifford Chance wrote it, that he had read it and that it was shared with the board.
Mr Jenkins later tried to play down the report, saying that it was prepared for disciplinary proceedings, not commenting on whether it went farther.
He also insisted that he had no idea about Libor-fixing until the report from regulators appeared last summer.
The MPs and peers were particularly incredulous over reports of unethical behaviour at the Barclays Wealth division, which were ignored by the bank’s internal compliance team.
The day before the hearing Barclays provided the commission with one internal report that was so heavily redacted “that even the page numbers have been blacked out”, according to Mr Tyrie.
Andy Love, a Labour member of the commission, took the Barclays bosses to task for mis-selling “on an industrial scale” after the most recent compensation provisions.
Mr Jenkins confirmed that he was in charge of Barclaycard between 2006 and 2009, when PPI was sold to credit card customers.
He said that more than 80 per cent of policies were mis-sold dating back to before 2004, but admitted that “there is no doubt we got it wrong”.
The FSA announced last week that it looked at 173 cases in which so-called interest rate swaps had been sold to small companies as part of an industry-wide pilot study.
It said that a “significant” number of them were likely to result in redress to the customer.
Mr Jenkins told MPs that he disagreed with Mr Diamond’s culture at the bank and that he was now “shredding the legacy” left to him.
He said: “It’s true to say we had debate over various topics concerning citizenship.
“I raised the point repeatedly that it’s actions that count and not words.”
Mr Diamond quit last year after the bank agreed a £290 million settlement with British and American regulators over the Libor rate-fixing scandal.
Mr Jenkins said that he, too, would be obliged to resign if something “grave” happened on his watch.
His comments come amid further criticism of Mr Diamond’s reign after the bank’s former head of remuneration, Alison Carnwath, told the commission last week that he was “reluctant” to accept that pay at the bank was too high and that the board ignored her recommendations to withhold his bonus for 2011.
The maximum bonus he was entitled to was £2.75 million, or 250 per cent of his £1.1 million salary.
Mr Jenkins appears to be facing an uphill struggle in overhauling the bank, with reports suggesting last week it is the subject of another investigation as authorities look into allegations that it lent Qatar money to invest in the bank in 2008 as part of an emergency cash call to avoid a government bailout.
The terms of the bank’s fundraising at the height of the financial crisis are already being scrutinised by the Financial Services Authority and the Serious Fraud Office.
Sir David told MPs today that he was unable to comment on the Qatar allegations while the investigations are continuing.
The Times.
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