The mood of the country, we are told, is turning against years of government-imposed austerity. We are fed up with being squeezed by spending cuts; we are rebelling against 1% pay caps – and we are absolutely right to do so. But the real reason the average household feels so badly off is less to do with government cuts and more to do with profiteering by private companies.
Research this week by Santander blows the whistle on the ever-growing portion of our monthly pay that goes on largely unavoidable household bills. It looked at bills for gas, electricity, water, TV, phone and so on – and found they have escalated in price far, far ahead of average wage rises. Since 2006, average pay packets in Britain have gone up by 19% in pounds and pence terms (in other words, not adjusting for inflation). Meanwhile, the average gas bill has gone up 73%, electricity 72%, and water 41%.
These are extraordinarily large real rises, and all the grimmer for families and pensioners on very tight budgets. These are the bills that simply have to be paid, leaving families with harsh choices about what to cut elsewhere.
For those on average incomes, it means the axe falls on the nicer things in life, such as the annual holiday or the occasional meal out. At the bottom of the income scale, already suffering from cuts to welfare benefits, the “choice” is not between an iPhone 5 or 6, but between shivering or eating.
At the top of the utility companies the view is very different. Just weeks after arguing against consumers having their bills capped to save them £100 a year, the boss of one utility, SSE, was given a 72% pay rise to £2.92m after this “robust performance”. The reward comes after years of bumper dividend payouts which have doubled from 32.7p a share 10 years ago to 62.5p most recently.
The water companies have also been fabulous performers – for the stock market, not you. As a study by the University of Greenwich found last month, consumers are paying around £2.3bn more a year in water and sewerage bills to the privatised companies than if they had remained in state ownership.
It found they have invested no significant new shareholder equity, but have managed to extract nearly all of their post-tax profit as dividends. The report calculated that every household is worse off by around £100 a year as a result.
The Santander research into household costs found that it wasn’t just the energy and water companies stiffing us with rising bills.