According to a report by the UK’s spending watchdog, water companies have been allowed to retain excess profits of at least £800m during the past five years rather than pass the cost savings on to customers, the Financial Times has reported.
The National Audit Office found that companies had enjoyed lower tax and borrowing costs than expected when the price cap had been agreed, allowing them to boost their profit levels.
Its study showed that while companies had reduced bills more than expected during the period, they had kept most of the £1.3bn windfall.
The average household spent £396 on water and sewage in 2014/15, and in 2013 these bills accounted for just over 2% of the average consumer’s annual spending.
That figure has been declining in recent years. Between 2010 and 2015, the average bill fell 2.6% in real terms. Ofwat, the water regulator, has told companies to reduce them by a further 5% over the next five years.
Water companies have previously come under fire for their tax arrangements. In 2013, the 19 water companies in the UK collectively paid £74m in corporation tax after making profits of more than £2bn.
Thames Water, the country’s largest supplier, was one of seven firms not to pay any corporation tax at all.