Conservative MPs have urged George Osborne to impose a windfall tax on the water companies amid growing claims that they are profiteering at their customers’ expense.
The move increases the pressure on the Government to do more to help families struggling with the “cost of living crisis”. It comes after Sir John Major, the former Prime Minister, called for a windfall tax on the energy companies.
Tory MPs are increasingly worried that Labour is making the running on living costs. They have turned their guns on the water companies, claiming they have raised their charges by 12.5 per cent since 2010, and 50 per cent since they were privatised in 1989, while handing their directors generous pay rises and bonuses. They say the industry regulator Ofwat must impose tougher targets so the firms reduce the 3.4bn litres of water lost through leakage each day– almost a quarter of the initial supply.
Robert Halfon, Tory MP for Harlow, said: “A windfall tax must be imposed on water companies who consistently raise prices above inflation, without water level leakage decreasing. The money raised must go back to consumers through lower prices.”
Charlie Elphicke, Tory MP for Dover, told a Commons debate on the water industry there was now an opportunity to foster competition in a sector where companies enjoyed a monopoly and consumers did not have a real choice. He said the industry needed to be regulated more effectively.
Owen Paterson, the Environment Secretary, wrote to the water companies on Tuesday, saying that their unexpectedly high profits needed to be translated into real benefits for customers through higher investment or lower bills.
But Anne McIntosh, Tory chairman of the Environment Select Committee, said: “The question is whether Mr Paterson’s letter to water companies is sufficient to spur the action needed to keep water bills affordable. Only three water companies have committed to introduce social tariffs under the current voluntary system even though the Government has made it clear that it expects water companies to support struggling households.”
Ed Miliband called for new social tariffs to help poor people pay their water bills in a speech stepping up his attack on David Cameron over living standards. He said that while Sir John understood the need for action, Mr Cameron did not. "His response to Labour's energy price freeze shows how out of mainstream is. He took issue with the whole idea of government intervention in a broken market," he said.
The water industry argues that it is already tightly regulated and there is "no free for all" on prices. The Government insists that average bills have risen in line with inflation but admits they have substantially outstripped increases in household income.