Shoplifting, fraud and leaky pipes add £9bn to our everyday household bills

Households in the UK are being forced to fork out as much as £9billion a year on bills to pay for the mistakes and dishonesty of companies and others.

Analysis by This is Money’s sister title, Money Mail, reveals that leaky water pipes, a faulty National Grid that is past its sell-by date and a growing shoplifting epidemic are costing the average household up to £361 a year.

Innocent workers and pensioners are footing the bill for waste and theft, after three decades of systemic under-investment in the upkeep of basic British utilities.

While it’s reasonable to expect some margin of loss to basic error, experts say the scale of the problem in some sectors is ‘outrageous’.

Consumer champion Martyn James says companies are paying out large dividends to shareholders while expecting households and customers to pay for mass errors.

‘It is outrageous that businesses are paying out dividends when the fundamentals of their infrastructure aren’t working,’ he says.

‘I don’t consider a firm to be in profit while it allows billions of pounds to go down the drain because it is failing to do basic maintenance. And if it’s not in profit, it shouldn’t pay out dividends.’

So how much are waste and theft adding to your bills every year?

Water waste and leaky pipes

A fifth of water is lost to leaks every year, costing the country £2.3billion in 2022, official figures from water industry regulator Ofwat show. More than a trillion litres of water were lost to leaky pipes in 2021.

This is the water that suppliers can’t account for because it enters their system but is not delivered to homes. Averaged out across the UK’s 28.2million households, that equates to around £82 on every household water bill each year.

Some leaks are inevitable, Ofwat says, as pipes can wear out or become damaged when they naturally expand and contract, especially in freezing or very dry weather.

But current waste water levels exceed the target of 16 per cent that the regulator has asked companies to achieve by 2025.

Thames Water, the nation’s biggest water company, reported that almost a quarter (24 per cent) of the water it supplies was lost to leakage last year.

James says this is largely down to a lack of competition, as there are too few companies in the sector. He says it can be traced back to the privatisation of essential utility infrastructure in the 1980s under former Prime Minister Margaret Thatcher.

He says: ‘The whole point of privatisation was to reduce the Big Government model and, in theory, make different sectors better through competition and consumer choice. But that isn’t what happened in practice. Some sectors — such as water — aren’t affected by competition, as we have to physically move house to change companies.’

Danni Hewson, of stockbroker AJ Bell, says: ‘The private sector hasn’t delivered the panacea that Thatcher’s government promised. A lot of the blame for that must rest with light-touch regulation, which has allowed huge pots of money to be syphoned into investors’ pockets at the expense of real investment and improvement.’

According to Ofwat, more than 40 per cent of pipes have been replaced since privatisation — that leaves 60 per cent that have not been updated, with some parts of the country still relying on Victorian and Edwardian infrastructure.

Ofwat has been clear that all water companies should be investing more in cutting leakage.

Total cost: £2.3billion

Per household: £82 a year

The price tag on shoplifting

A rise in shoplifting is adding to the soaring cost of a food shop for innocent families. Food prices rose by 18.4 per cent in the year to May, the sharpest increase in more than 45 years, according to the Office for National Statistics (ONS).

The cost of living crisis has led to a spike in shoplifting, with recent ONS figures revealing that incidents jumped by 22 per cent in the year to September 2022.

Retailers paid £1.7billion to cover the cost of shoplifted items and security measures designed to prevent theft in the 2021-22 tax year, according to the British Retail Consortium (BRC).

That has added an average of £59 a year to every household’s grocery shop.

Tom Ironside, the BRC’s director of business and regulation, explains that this is ‘money that would be better used to reduce prices and invest in a better customer experience’.

Total cost: £1.7billion

Per household: £59 a year

The hotwire thieves

Billions of pounds worth of energy is lost every year to an inefficient energy grid and theft, adding about £170 a year to the average household’s energy bills.

The National Grid loses £2.8billion worth of energy to the process of carrying electricity around the grid. That is the equivalent of £100 of every home’s annual bill.

Energy illegally syphoned from household and commercial supplies costs the country £400million a year, according to Crimestoppers. The charity calculates that this adds another £50 to each household’s annual costs.

Meter tampering is where people ‘hotwire’ their meter so it doesn’t fully record how much electricity or gas is being used; or bypass it completely so no energy usage is recorded. This can be highly dangerous, resulting in electric shocks, fires or gas explosions.

Crimestoppers estimates that around 250,000 cases of energy theft go unreported every year.

Cable theft is also a growing problem, as copper or aluminium cables or wires are stolen from places such as construction sites, railway tracks, telecommunications networks and power grids.

Smart Energy International, a specialist publication, estimates that between £484million and £655million is lost to this type of theft each year. That is equivalent to £20 per household, based on the average broadband bill — which is £190 a year, according to consumer group Which?

Total cost: £3.8billion

Per household: £170 a year

Insurance fraud

Chancers made 89,000 dishonest insurance claims, costing £1.1billion in 2021, according to the Association of British Insurers trade body.

Insurers invest at least £200million each year in spotting fraud, which adds £50 to the total cost of household insurance, according to estimates from the Fraud Intelligence Bureau. It claims that a further £2billion goes undetected.

This includes cases where someone exaggerates a claim for financial gain or provides false information when applying.

Cases reported to the City of London Police Insurance Fraud Enforcement Department surged by 61 per cent over the year to April.

Total cost: £1.1billion

Per household: £50 a year

Overall cost: £8,900,000,000

Per household: £361 a year