The reductions, proposed by Ian Byatt, the Director General of Ofwat, are higher than those envisaged by ministers and were immediately greeted with howls of protest from water companies. In a consultation paper, Mr Byatt said that household water bills needed to come down substantially to reflect efficiency gains and recommended a 15-20 per cent cut.
That would reduce the average domestic bill from pounds 245 this year to between pounds 195 and pounds 205 in April 2000 when the new charges take effect.
But in some areas of the country, the cut in bills would be significantly higher. Customers of South West Water, whose charges are the highest in the country, could see the average bill of pounds 344 fall by as much as pounds 69. In the Thames region, where charges are the lowest in the country, the average bill of pounds 202 would come down by between pounds 20 and pounds 30.
Mr Byatt's proposals cover the five year period from 2000 to 2005. He conceded that after the one-off cut, bills may start rising in subsequent years to pay for an pounds 8.5bn programme of improvements in water quality.
But he said that even after this period, only customers of two companies - Northumbrian and Southern - should be facing higher water bills than they are likely to pay next year.
Mr Byatt said he was aware of concern in ministerial circles that customers could be confused by a price cut followed by subsequent increases. But he said: "Customers may feel that they would prefer to keep the money in their pockets rather than paying in advance for improved services."
Water UK, the body representing the country's water companies, said it was disappointed at the size of the one-off reduction and said Mr Byatt's sums did not add up.
Brian Duckworth, chairman of Water UK and managing director of Severn Trent, said:
"The Government wants us to deliver an ambitious environmental and quality programme, customers want it delivered and we want to deliver it but it has to be financed.
Common sense says you can't have more for less. Regardless of the position of individual companies the fact is that less cash means they'll have less ability to invest."
`Profits will fall', page 20