£50 water bill rise will add to burden on family finances

They will go up by about three per cent above inflation each year between 2010 and 2015, under plans unveiled today by Thames Water.

The average annual bill will rise by about 16 per cent in real terms, from around £290 to £340.

The higher charges will help pay for the first phase of the Tideway Tunnel - designed to end sewage being pumped into the Thames - as well as the next round of mains pipe replacements and a record £6.5 billion draft programme of improvements.

Although the increase is smaller than those being pushed through by energy companies, it comes at a time when family budgets are also under pressure from rising costs of petrol, food and mortgages.

Thames Water, owned by a consortium led by Australian private equity firm Macquarie, said it had consulted widely with customers before drawing up its plans.

The proposed rises are being presented today to Ofwat for approval. The water watchdog and the company will then enter into negotiations before final price increases are agreed in November next year. They will take effect in April 2010.

Peter Antolik, director of regulation at Thames, said: "This time we have gone further than ever in discussing the plans with customers in advance. We asked them what they wanted to pay for, what they expected the performance to be, and about the strategy for the next 25 years. We got a lot of feedback - hundreds of comments."

But consumer groups are likely to be unhappy. When Thames announced a 30 per cent rise in profits to £590 million in June the Consumer Council for Water called on the company to share its success with customers.

Much of the money being raised by the bill increases is earmarked for major projects, including:

£1.3 billion on the first phase of construction of the Tideway Tunnel - known as the super-sewer - between Abbey Mills in Stratford and the Beckton sewage works in Newham. The money will also cover much of the preparatory work for phase two, which will run under and beside the Thames as far west as Hammersmith.

£1 billion on another five years replacing leaky Victorian mains. The programme will shift its focus from central London to the suburbs. The company aims to cut leakage from about 700 million litres a day at present to 570 million litres by 2010, ending its status as Britain's leakiest water supplier.

£500million on cutting the risk of London homes being flooded by sewage during storms. About 2,500 homes are currently vulnerable to sewer flooding and Thames Water hopes to reduce this number by 500 by 2010.

£250 million to start the construction of a 150 billion litre reservoir near Abingdon in Oxfordshire.

There will also be smaller levels of investment in reducing bad smells near sewage works at Mogden, Beckton, Crossness and Riverside.