Utility bill hikes set to outstrip inflation up to 2030

Increases in energy and water bills will continue to outstrip inflation up to 2030 due to the high level of infrastructure investment required, according to the National Audit Office (NAO).

In a report published today, the NAO urged the treasury to ensure there are mechanisms to assess the impact of infrastructure investment on consumer bills, particularly those paid by low-income households.

The Treasury expects that over two-thirds of the £310 billion worth of the planned infrastructure it has identified will be privately financed, owned and operated but paid for by consumers through their utility bills.

In the meantime, the NAO estimates average household energy bills will increase by £221 between 2013 and 2030 in real terms.

The NAO is particularly concerned that energy and water bills have increased significantly in recent years, while incomes have not.

The report stated that customers on the lowest incomes spent 15 per cent of their total household income on energy and water bills in 2011.

Amyas Morse, head of the NAO, said: “Government and regulators do not know the overall impact of planned infrastructure on future consumer utility bills, or whether households, especially those on low incomes, will be able to afford to pay them. It seems critical to know ‘how much is too much’, based on reliable information.”

The NAO said that despite some good initiatives, such as efforts by government to model future energy prices and bills, the lack of a common approach across sectors to forecasting bills or measuring affordability was worrying.

The report also recommended the treasury should publish the expected overall impact on consumer bills, to promote transparency and debate about new infrastructure and bill increases.

In addition, it stated that departments should consider the implications for consumer bills and their overall affordability before making policy commitments influencing infrastructure.

Richard Lloyd, executive director of consumer group Which?, said he wanted the NAO to be given responsibility for an ongoing review of all energy policy costs and urged the  Chancellor George Osborne to “stand up for hard-pressed consumers” in the Autumn Statement.

“The Government must demonstrate that they are protecting the interests of consumers by keeping a tight rein on these costs, and ensuring full transparency and value for money,” he said.