The true cost of water

If you’re reading this in England or Wales, I’ve got some bad news: your water bill is about to go up. From April 2025, water bills are set to increase by £31 a year, an average of 33%, over the next five years. But the biggest hike will be this April, with bills rising by £86 on average, followed by smaller increases in the coming years.

Ofwat chief executive David Black told the BBC that this will fund investment to cut sewage spills, reduce leaks and ensure customers get a better service. Some £104bn can now be spent on upgrading water systems, which will mean "cleaner rivers and seas and secure long-term drinking water supplies for customers", he said. An expected £20 billion investment from the bill hike between April 2025 to March 2026 will be the highest ever level of expenditure in a single year, potentially going towards nine new reservoirs, nine new water transfer schemes, upgrade the capacity of 1,700 sewage works. All of which is much needed. So, are the bill increases justified? Was the price of water too low all along? Well, it’s complicated. 

According to We Own It, a campaign group calling for re-nationalisation of the water sector, “Privatisation was supposed to reduce your bills, it's done the opposite. Only 65% of the [April 2025] price rise will be used for investment. Your private water company will take more than one third of your bill to pay interest on debt and dividends to shareholders. Since privatisation in 1989, companies have paid £78bn in shareholder dividends while cutting annual investment spending. Meanwhile debts have gone from zero to over £60bn, much of this siphoned off overseas.” The largest shareholder of Southern Water, for example, is a private equity fund registered in Luxembourg managed by an Australian investment bank. Wessex Water and Northumbrian Water are owned by large Asian conglomerates.

Kate Bayliss writes on the London School of Economics blog, “Thames Water, with its history of financial engineering, is at risk of financial collapse with debts of nearly £15bn and a track record of poor performance. Price increases are planned but trust in the sector is at an all-time low.” Rebecca Sinker, member of the Clean Water Action Group in Hastings, is a case in point, telling the BBC that "We don't trust them to spend our money in the right way, and we can't go anywhere else for our water. It's a private company monopoly." 

River campaigner (and music icon) Feargal Sharkey, was also having none of it, writing for The Guardian. “£100m they have paid out to fat-cat bosses in salaries and benefits in the past 10 years…. In an ideal world, if the boards of Ofwat and the Environment Agency understood anything about honour, chivalry or principle, they would have resigned – and certainly should do so today, en masse.” He points out that every single river in England is polluted, a whole village has been poisoned and, between January 2020 and December 2023, pipes were dumping sewage into our rivers and on to our beaches for a total of 12,216,693 hours.

And yet, given that The National Audit Office (NAO) forecasts that the total water demand will start to exceed supply in England no later than 2034, water is currently undervalued. The average UK householder uses around 150 litres of mains water per day, compared to the EU average of 120. While crises in the energy sector have made us all more frugal with our energy use, no similar signals have reached our water use – arguably, April’s price rises will do just that.

Currently, the average water bill for a UK household stands at approximately £473 a year, according to Water UK. It is likely your cheapest utility bill. The average annual broadband bill now hits £480. While as of January to March 2025, the average annual energy bill in the UK was £1,738, according to the House of Commons Library, and has been as high as £2,380 in 2022.

A review by the UK water efficiency body WaterWise finds that “the low price of water is a barrier [to water saving] . . . it creates little or no financial incentive for homebuyers to demand, and developers to install, water efficiency and water-reuse measures. Financial savings on water bills are very low compared to savings made by energy efficiency and carbon offsetting.” Equally, when I spoke to Rick Hogeboom of the Water Footprint Network, for my book The Last Drop, he told me that “pricing is something we can’t do without… there will always be a percentage of the population that will just not care or will not be persuaded to change their behaviour, or their diets, without that”

As for the mainstream adoption of rainwater harvesting and grey-water reuse technologies, you can forget it if the price of water remains low. I spoke with Feargal Sharkey for my book, too. He had concluded that the only way to sort out the country’s mess is via big expenditure on water infrastructure, via a higher price for water. He questioned why water isn’t subject to a tiered pricing model: “If you’ve got an issue with universal access to water, fine… you should be able to live on 100 L of water a day, so we’ll charge you a cheap flat rate for your household for 100 L of water per person. After that, if you want to fill up your swimming pool, go ahead . . . but we’re going to charge you seventy-five f*cking grand.”

This is also known as a ‘rising block tariff’ (RBT) and is common in many water-stressed countries. With only 500mm of rainfall in the south east, it’s time we started acting like the water-stressed country we are, too. “The price of water in Israel is very high,” Gidon Bromberg of EcoPeace told me. “Water use is quite low and that’s because of price.” While Singapore has been using tiered water pricing to drive efficiency for over fifty years. The book The Singapore Water Story informs that in 1973, “an increasing block tariff system was introduced to raise the [water utility company’s] total income and prevent the wastages”, based on “an escalating cost for every block of 25 m³.” Water consumption dropped 6.1 per cent the first year it was introduced. Tiered pricing means both more water and more money to go around.

Since 2024, a number of UK water companies have finally begun running RBT trials amongst small groups of customers. The early signs are good. Affinity Water already believe that at least two out of three homes in their trial will pay less for their water than they do currently.

For this to work, however, you need a water meter – and ideally a smart one. Incredibly, some 40% of water customers in England and Wales still don’t have a water meter at all, which means that your water bill is not based on the amount of water you use but just a guessed at (and often high) flat rate by your water company. If you don’t have a water meter, you have a right to request a free one fitted by your water company. Unless you are hugely wasteful with water, this will most likely save you money. In fact, the coming hike in water bills makes that even more apparent: Affinity Water non-metered customers will see their price go up by 29%, compared to 19% for metered customers.

So, after all that, is Ofwat right to raise British water bills? In short, there are two things happening in parallel here. Water bills are currently too cheap for people to care about water efficiency, and investment is sorely needed. So yes, water bills did need to rise. But are the private water companies, who have out paid £78bn in shareholder dividends and piled up £60bn in debt, the right beneficiaries of this? Following the disaster of the sewage crisis, and the near (and perhaps still imminent) collapse of Thames Water, the Labour government would have a lot of public support for renationalisation using special administration measures. Paying more knowing that it is going directly towards fixing the water crisis, is one thing. Paying extra to continue to fill multinational investors’ coffers – that’s a harder pill to swallow.