Floods will push up water bills

August 2, 2007 at 12:26 pm

Baroness Young, chief executive of the Environment Agency, has warned the public that water bills will need to rise to meet the cost of improving flood defences in the wake of this summer’s floods across England. Talking to the Daily Telegraph, Lady Young said “Bills are going to have to go up, both because of drought and floods. You either pay upstream to prevent, or you pay downstream to mop up but you’ve got to pay, climate change is coming home to roost.”

Baroness Young’s comments have elicited a range of suprised and angry reactions. The timing of the comments are particularly questionable, given that thousands of homes across the country are still underwater, and the Environment Agency has just announced bonuses for its managers for meeting government targets.

Water companies have come under criticism from consumer groups for under-investing in infrastructure. Severn Trent, which has a monopoly in Gloucestershire, one of the most seriously hit counties, has recently reported profits of £300 million. The water industry as a whole has failed to meet regulator Ofwat’s targets for insfrastructural investment of £4.3 billion for 2006. The actual amount invested in repairs and upgrades was closer to £3.4 billion.

Many consumers will now be asking why they should pay higher rates when the water companies aren’t prepared to invest their own profits into their business. Even at existing levels, consumers are facing an average 18% increase (after inflation) up until 2010. If the rises Baroness Young talked about materialized, they would come on top of this figure.

Tony Smith, chief executive of the Consumer Council for Water is concerned about the value for money that customers are getting. He said, “Firstly, we want to press the water companies and Ofwat to ensure that the huge amount that has been spent on maintenance already – that customers are paying for – has been spent in a useful way and delivered the right protection for customers.”

Baroness Young’s comments were directly contradicted by Ofwat Chairman Philip Fletcher, who said that there would be no changes in the price plans up until 2010. He cited the Environment Secretary Hilary Benn’s promise that the government would invest £200 million into flood defences. Water companies were also baffled by the Baroness’s comments. As an outsider, she has very little influence in their pricing strategies.

This episode raises questions about the competency of the Environment Agency and its chief, particularly given that Baroness Young has received a £24,000 bonus on top of her annual £163,000 salary. Taxpayers, particularly those whose homes are now underwater, would be forgiven for wondering how this and other management bonuses were earned. Some residents of Tewksbury, one of the worst hit towns, have called for the bonuses to be repaid into the Flood Appeal Fund, to help those struggling with the costs of the flood.

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