Affordability of infrastructure – Public Accounts Committee stands up for consumers

Affordability of new infrastructure for consumers was put at the top of the agenda this week by a new report from the powerful Public Accounts Committee.

Chair of PAC, Margaret Hodge MP

MPs on the committee, led by chair Margaret Hodge, called on the Treasury to assess the combined impact on consumers, including different household types and those most vulnerable to price rises, of increased bills that result from new infrastructure investment.

The PAC published its report on Infrastructure investment: impact on consumer bills on Tuesday.

“No one seems to be sticking up for the consumer in all of this. This is of particular concern given that the poorest households are hit hardest by increases in bills.”

“A staggering £375bn of investment is needed to replace the country’s ageing infrastructure, help meet policy commitments such as climate change targets and long term needs of a growing population. It is the consumer – through their various bills – that is expected to fund at least two thirds of this investment where the infrastructure is financed, built, owned and operated by private companies,” chair of the PAC Margaret Hodge MP said.

“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.”

She pointed out that while median incomes did not rise significantly in the decade to 2011, energy bills rose by 44% and water bills by 21% in real terms.

“High levels of new investment in infrastructure mean that bills and charges are likely to continue to rise significantly in the future. The Government is projecting that average household energy bills in 2030 for example, will be 18% higher in real terms compared to 2013.

“No one seems to be sticking up for the consumer in all of this. This is of particular concern given that the poorest households are hit hardest by increases in bills.”

PAC, she said, is calling on Treasury to produce and publish an assessment on the long term affordability of bills across sectors. This should involve:

Establishing with departments and regulators clear responsibilities in each sector for assessing long term affordability

Bringing together sector-level assessments, starting with energy and water, so that long term affordability for consumers can be considered in aggregate

And assessing the combined impact of increased bills on different household types, including those most vulnerable to price rises.

Regulators also need to play their part, PAC said, by having a co-ordinated approach to assessing the impact on bills and affordability of infrastructure investment, in collaboration with Government.

PAC also urged government departments to factor in the potential impact of complexity and uncertainty on investors when making or changing policy affecting infrastructure. In particular this applied to Department for Energy & Climate Change which “needs to act quickly to give certainty to unlock much needed energy investment or the consequences on consumer bills will be worsened.”

Regulators, PAC said, needed to improve their protection of consumers’ interests by paying closer attention to the financial structures of regulated companies and by verifying, in a proportionate way, whether infrastructure has been built to the standards expected. “They must have robust plans to address any gaps in their capacity and skills to do this.”

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