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MPs warn over £250bn consumers bill

The Government must step in to assess whether consumers can afford years of rising household bills under plans to modernise Britain’s infrastructure, MPs have said.

Consumers will be expected to meet around £250 billion of the cost of upgrades including major energy, water and transport projects, but MPs warned that poorest households would be hardest hit by increased bills.

The Commons Public Accounts Committee also warned that uncertainty caused by Government policies could potentially add to rising energy bills, with investment in new power stations being delayed and a “lack of urgency” in replacing coal-fired plants.

The Treasury has £375 billion of projects in its infrastructure pipeline, which stretches to 2030, aimed at replacing ageing assets, supporting growth, meeting the demands of a growing population and complying with European regulations and climate change targets.

Some two-thirds of this investment will be from private companies but paid for by consumers through utility bills and charges, such as rail fares.

“Energy and water bills have risen considerably faster than incomes in recent years, and high levels of new investment in infrastructure mean that bills and charges are likely to continue to rise significantly,” the MPs said.

The report said that “no one in Government is taking responsibility for assessing the overall impact of this investment on consumer bills and whether consumers will be able to afford to pay”.

“This is a particular concern given that the poorest households are hit hardest by increases in bills.”

The cross-party committee said the Treasury should ensure that an assessment of the long-term affordability of bills is carried out.

The Committee’s Labour chairwoman Margaret Hodge said: “Currently, consumers rely solely on Government and regulators to protect their interests. But it doesn’t take much nous to work out that this is going to have a tough impact on the consumer.”

She said average household energy bills in 2030 were predicted to be 18% higher in real terms than in 2013.

“No one seems to be sticking up for the consumer in all this,” Mrs Hodge said.

“T his is of particular concern given that the poorest households are hit hardest by increases in bills. Poorer households spend more of their incomes on household bills relative to richer households, meaning that funding infrastructure through bills is more regressive than doing so through taxation.

“We are calling for the Treasury to produce and publish an assessment of the long-term affordability of bills across the sectors. They need to establish with departments and regulators who is responsible for what in each sector when it comes to assessing the long-term affordability of bills, and pull all the information together.

“Crucially, they need to assess the combined impact of increased bills on different household types, including those households most vulnerable to price rises.

“Regulators must play their part by having a coordinated approach to assessing the impact on bills and affordability of infrastructure investment, in collaboration with Government.

“We also need to be reassured by regulators that infrastructure has been built to the standards expected, to improve their protection of consumers’ interests.”

The Committee warned that “t he complexity and changing nature of Government policies, particularly in the energy sector, risk delaying much needed investment”.

The MPs heard there was planning consent for 15 gigawatts of gas-powered electricity generation but ” investors are not going ahead due to a combination of unfavourable market prices for gas and electricity, and lack of certainty with regard to the Government’s electricity market reforms”.

The Committee said: “T here is a challenge to the adequacy of supply which is made more difficult by current market interventions. There appears to be a lack of urgency in Decc (Department of Energy and Climate Change) when so much of our coal fired plants are being decommissioned before the end of 2015.”

The MPs said Energy Secretary Ed Davey’s department ” needs to act quickly to give certainty and unlock much needed energy investment or the consequences for consumer bills will be worsened”.

A Decc spokesman said: ” We’re preventing the predicted energy crunch by turning round a legacy of underinvestment and neglect. We have put reforms in place to drive up to £100 billion of private sector investment in electricity between now and 2020 with £45 billion invested already.

“If we do not take action now, we are at risk of becoming over-reliant on expensive imported gas and demand for electricity could double by 2050.

“Our analysis shows that household energy bills in 2020 are expected to be, on average, around £166 lower as a result of policies than they would have been without policies.”

A Treasury spokesman said: “The country will pay a heavy price if we don’t invest in the infrastructure essential for our future.

“The National Infrastructure Plan provides unprecedented certainty about what those investments are and making sure they are built in a way that delivers value for consumers and taxpayers is at the centre of it. The analysis in the PAC report fails to make a proper assessment of this.

“We uphold a robust independent regulatory regime with powers to ensure the interests of consumers are properly protected, including the establishment of a new Competition and Markets Authority this year.

“We are cutting taxes and have taken targeted action to reduce bills. At the last Autumn Statement alone we announced a series of steps which are saving the average household around £50 on their energy bills, and a cap on rail fare increases saving quarter of a million annual season ticket holders an average of £25 this year.

“It is only because of the Government’s credible economic plan that we have been able both to invest in infrastructure and take action on bills. The single biggest risk now would be abandoning that plan – which would mean worse infrastructure, higher bills, and a weaker economy.”

Richard Lloyd, executive director of consumer group Which?, said: ” Despite calls from Which?, the NAO and the PAC, the Government has still not published an affordability assessment of the impact on consumer bills of infrastructure costs or made a convincing case that these are being kept under tight enough control.

“Today’s findings show why it’s vital that the Government and regulators get a tighter grip on the massive costs that are being passed on to household bills. We need to see rigorous, independent scrutiny to ensure that these costs are affordable and provide value for money for consumers.”

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