British utility bills to rise above inflation for 17 years

LONDON Wed Nov 13, 2013 11:46am GMT

A gas cooker is seen in Boroughbridge, northern England in this November 13, 2012 file photograph. REUTERS/Nigel Roddis/Files

A gas cooker is seen in Boroughbridge, northern England in this November 13, 2012 file photograph.

Credit: Reuters/Nigel Roddis/Files

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LONDON (Reuters) - Britain's utility bills will continue to rise above inflation for the next 17 years to pay for infrastructure investment, the government's spending watchdog said on Wednesday in a report that stoked a political debate over high living costs.

The National Audit Office said planned infrastructure work will cost 310 billion pounds and families will pay for two-thirds of that total through higher bills.

With an election 18 months away, Britain's political parties are competing to win the argument over how to deal with rising utility prices and an increase in the wider cost of living at a time of weak wage growth.

"High levels of expected investment in new infrastructure mean that energy and water bills may rise significantly," the report said. "Consumers will pay for the infrastructure itself, along with the costs of maintaining and operating the infrastructure."

Energy bills will rise by 18 percent in real terms between now and 2030, compounding the impact of recent increases and years of stagnating wages, it added.

The government says investment in energy, water and telecoms infrastructure is needed to replace ageing equipment, cope with a growing population and pay for new low-carbon power sources to meet climate change targets.

The watchdog criticised the government and regulators for failing to do more to calculate the effect of higher bills on consumers. It said more research is needed to see if the poorest families will be able to cope.

Between 2002 and 2011, energy bills rose by 44 percent and water bills by 21 percent in real terms, while incomes of poorer households fell 11 percent over the same period, when adjusted for inflation, it said.

The Labour Party, leading in the polls, describes the squeeze on families as a "cost of living crisis".

Labour leader Ed Miliband put Prime Minister David Cameron on the back foot over high utility prices in September with a promise to freeze bills for 20 months if he wins power.

Recent above-inflation price rises by four of Britain's "Big Six" energy suppliers have kept the issue at the top of the political agenda.

Labour MP Margaret Hodge, who chairs parliament's Public Accounts Committee, said she had serious concerns about asking consumers to pay for infrastructure projects.

"Households up and down the country are already struggling to cope with rising water and energy costs," she said.

A government spokesman said it had cut taxes for 25 million people, helped the most vulnerable with bills and frozen planned fuel duty rises.

(Editing by Patrick Graham, John Stonestreet)

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