Anger over calls to cut environment from water budgets

Water Voice has called on the government and Ofwat to remove a large swathe of environmental improvements outlined in water companies final business plans for the fourth periodic review of water prices. The improvements would push the price of water 29% above inflation over the next five years, far too high for most consumers, the group said.

In an open letter, Maurice Terry, Chairman of the consumer interest group said that government and Ofwat should: "Identify all high-cost, low-benefit environmental improvements and remove them from the quality programme to allow more time to examine lower-cost options - and whether the improvements are needed at all within a context of steep proposed increases."

Mr Terry expressed particular concern for the poorer sections of society, saying that the increases could drive those on low and fixed incomes into greater debt. "Having sanctioned such a large environment programme, to be funded by customers, it is up to government to take policy responsibility for the consequences," he said.

The call has angered those within the environmental community who claim that the environmental improvements are essential and the price rises easily affordable.

Andrew Skinner, Director of environment protection for the Environment Agency, said: "With so many other issues pushing up prices, Water Voice is off target with its proposals for the best deal for customers. Increasing environmental quality has the support of consumers and industry alike who see it as a public right and a spur to further investment respectively. Successive opinion polls have demonstrated the willingness of the public to pay through water bills for a clean and healthy environment."

The Environment Agency estimates the annual price rise to customers at between £1 and £7 depending on region and company.

The Environmental Industries Commission (EIC) puts the absolute increase in water bills at roughly the same price as a can of fizzy drink per week for each household. In a letter to government, Merlin Hyman, Director of the EIC, said that these costs to the consumer had to be set against the huge economic benefits to England and Wales of cleaner water, which he estimated at between £0.4 and £0.6 billion per year.

The RSPB also reacted angrily to Water Voice's comments. Phil Burston, Senior Water Policy Officer for the RSPB said: "They should challenge water company costs, rather than call for cuts in much-needed work to clean up our rivers and coasts."

The extent of the rises and the scope of the investment in the government's price review has caused consternation from industry, environmental and consumer groups for some time. The government published its principal guidance in March this year (see related story) sanctioning a programme of infrastructure investment and expenditure in the region of £20 billion between 2005 and 2010.

This publication had been delayed by six weeks amid rumours of internal wrangling within government over the effects of the associated price rises during an election year (see related story) and came after Ofwat itself had recommended that water companies cut £5 billion from their spending plans (see related story).

This latest outburst on the matter comes during the same week that Severn Trent, Britain's second largest water utility, announced a nine per cent rise in annual profit after recently raising prices.

United Utilities also recently announced record profits as well as having the highest predicted increases in water costs to consumers in its spending plans (see related story).

All players must now wait for Ofwat to announce draft price limits on August 5 2004 before the final decisions on December 2.

By David Hopkins



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