Households face higher bills to cover
£250 billion cost of upgrading UK’s
crumbling roads, railways and utilities
and poor will be hit hardest, MPs warn
- Most costs will be passed on to consumers through higher bills
- Projects costing more than £375billion planned for the next 15 years
- ‘No one seems to be sticking up for the consumers in all this,’ said committee chair Margaret Hodge
Households will be whacked with a bill of £250billlion to upgrade Britain’s crumbling infrastructure and the poorest will be hit hardest, MPs have warned.
Major energy, water and transport projects have all been planned over the next 15 years, but no regulator or government department has worked out whether households will be able to pay for them, they said.
Energy and water bills have been rising considerably faster than wages in recent years and this trend is likely to continue, the Commons Public Accounts Committee warned.
Forking out: Upgrading Britain’s energy, road and rail infrastructure will cost billions over the next couple of decades
But although pressure on cash-strapped families is likely to continue ‘no one seems to be sticking up for the consumers in all this,’ the committee’s chair Margaret Hodge said.
The MPs urged government to step in to assess whether consumers can afford years of rising bills under plans to modernise Britain’s infrastructure.
As much as two-thirds of this investment will be taken on by private companies, but paid for by consumers through utility bills and user charges such as rail fares.
This is likely to lead to higher household bills, hitting poorest families hardest as they spend a higher proportion of their incomes on bills.
Energy bills alone are predicted to be 18 per cent higher in real terms in 2030 than in 2013, MPs warned.
‘Energy and water bills have risen considerably faster than incomes in recent years, and high levels of new investment in infrastructure mean that bills and charges are likely to continue to rise significantly,’ the MPs said.
The report said that ‘no one in Government is taking responsibility for assessing the overall impact of this investment on consumer bills and whether consumers will be able to afford to pay’.
The cross-party committee said the Treasury should ensure that an assessment of the long-term affordability of bills is carried out.
Margaret Hodge added: ‘Currently, consumers rely solely on Government and regulators to protect their interests. But it doesn’t take much nous to work out that this is going to have a tough impact on the consumer.
‘This is of particular concern given that the poorest households are hit hardest by increases in bills. Poorer households spend more of their incomes on household bills relative to richer households, meaning that funding infrastructure through bills is more regressive than doing so through taxation.
Warning: MPs said household bills will have to rise to pay for the planned infrastructure projects
‘We are calling for the Treasury to produce and publish an assessment of the long-term affordability of bills across the sectors. They need to establish with departments and regulators who is responsible for what in each sector when it comes to assessing the long-term affordability of bills, and pull all the information together.
‘Crucially, they need to assess the combined impact of increased bills on different household types, including those households most vulnerable to price rises.’
The Commons Public Accounts Committee also warned that uncertainty caused by Government policies could potentially add to rising energy bills, with investment in new power stations being delayed and a ‘lack of urgency’ in replacing coal-fired plants.
The Committee said: ‘There is a challenge to the adequacy of supply which is made more difficult by current market interventions. There appears to be a lack of urgency in DECC (Department of Energy and Climate Change) when so much of our coal fired plants are being decommissioned before the end of 2015.’
The MPs said Energy Secretary Ed Davey’s department ‘needs to act quickly to give certainty and unlock much needed energy investment or the consequences for consumer bills will be worsened’.
A DECC spokesman said: ‘We’re preventing the predicted energy crunch by turning round a legacy of underinvestment and neglect. We have put reforms in place to drive up to £100billion of private sector investment in electricity between now and 2020 with £45billion invested already.
‘If we do not take action now, we are at risk of becoming over-reliant on expensive imported gas and demand for electricity could double by 2050.
‘Our analysis shows that household energy bills in 2020 are expected to be, on average, around £166 lower as a result of policies than they would have been without policies.’
Holding to account: Chair Margaret Hodge said no one was looking out for the consumer
A Treasury spokesman said: ‘The country will pay a heavy price if we don’t invest in the infrastructure essential for our future.
‘The National Infrastructure Plan provides unprecedented certainty about what those investments are and making sure they are built in a way that delivers value for consumers and taxpayers is at the centre of it. The analysis in the PAC report fails to make a proper assessment of this.
‘We uphold a robust independent regulatory regime with powers to ensure the interests of consumers are properly protected, including the establishment of a new Competition and Markets Authority this year.
‘We are cutting taxes and have taken targeted action to reduce bills. At the last Autumn Statement alone we announced a series of steps which are saving the average household around £50 on their energy bills, and a cap on rail fare increases saving quarter of a million annual season ticket holders an average of £25 this year.
‘It is only because of the Government’s credible economic plan that we have been able both to invest in infrastructure and take action on bills. The single biggest risk now would be abandoning that plan – which would mean worse infrastructure, higher bills, and a weaker economy.’
But Richard Lloyd, executive director of consumer group Which?, said that the government has not gone far enough to ensure that costs are being kept down. ‘Despite calls from Which?, the NAO and the PAC, the Government has still not published an affordability assessment of the impact on consumer bills of infrastructure costs or made a convincing case that these are being kept under tight enough control,’ he said.
‘Today’s findings show why it’s vital that the Government and regulators get a tighter grip on the massive costs that are being passed on to household bills. We need to see rigorous, independent scrutiny to ensure that these costs are affordable and provide value for money for consumers.’