Replacing the UK's ageing energy and water infrastructure is likely to see utilities price hikes continuing for nearly two decades

Ageing infrastructure means no end in site for bill rises

The cost of renewing Britain's infrastructure means consumers face another 17 years of above-inflation increases in utility bills.

The National Audit Office (NAO) said the Government had little idea of the impact the continued price hikes would have on households or whether they would they would even be affordable, particularly for those on the lowest incomes.

The Treasury estimates that at least two-thirds of the £310bn of planned infrastructure investment over the next decade and beyond will come from private companies paid for, ultimately, by consumers through their utility bills.

The NAO said that such high levels of planned investment meant that the increases in charges for energy and water were now expected to continue to outstrip inflation until 2030.

Deputy Prime Minister Nick Clegg said: "We are straining every sinew to keep energy bills and utility bills as low as we possibly can. There are a range of forces that drive utility prices, particularly energy prices.

"Around 60 per cent of the rise in energy bills over the last few years comes from wholesale prices. But there are other contributing factors. We are looking in Government at the levies which the Government and previous governments have inserted into consumer bills."

But he added that a major investment programme was needed to keep the lights on, which had to be funded.

At an event in a west London supermarket, he said: "We have a very major problem as a country. The previous government, certainly previous governments, failed singularly to invest in the energy infrastructure that we need in this country to keep the lights on and make sure that we get a sustainable and diverse energy mix."

Two-thirds of energy-generating capacity needs to be replaced, he said, and the £110bn needing to be spent on power generation “has to be paid for somehow".

"We have to massively revamp and reinvest in the way in which we generate energy and the way we consume in this country and that's an inescapable fact," he said.

The Department for Energy and Climate Change (Decc) has estimated that energy bills could go up by 18 per cent in real-terms increase over that period – although the NAO said its calculations covered just three-quarters of the investment in the Government's National Infrastructure Plan.

At the same time, the only available projection for water bills, prepared by one water company, suggests that they could rise by 28 per cent by the end of the next decade.

Despite the prospect of such hefty increases, the NAO said the Government had made no overall assessment of its infrastructure plans on future bills or whether those bills would even be affordable.

"Affordability can only be assessed taking into account all household bills, household incomes and wider costs of living," it said.

"Gaps in analysis, and the lack of a common approach to measuring affordability, mean that the Government does not have an overall picture of affordability, either for the average household or for those on low incomes."

The head of the NAO, Amyas Morse, said that ministers needed to know at what point the continuing price rises would become too much for consumers to bear.

"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," he said. “It seems critical to know 'how much is too much', based on reliable information."

A Government spokesman said: "Decades of underinvestment have left the UK struggling with insufficient energy infrastructure, but we are committed to fixing the failures of previous governments, and to making the difficult decisions that will allow us to have the infrastructure we need.

"The Government is committed to supporting hardworking families and that's why we're cutting tax for 25 million people and taking 2.7 million people out of income tax altogether by 2014, helping the most vulnerable with their bills, freezing fuel duty and sticking to the economic plan that has got all sectors of the economy growing."

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