WATER companies have been given permission to increase bills, leading to a rise of about 11 per cent in the North-East.

After the increases were announced yesterday, campaigners said they feared millions of households would struggle to pay their bills.

Maxine Holdswoth, senior water expert at the National Consumer Council, said: "Water debt already stands at £893m and rising. The burden of water bills for people on fixed incomes, like pensions and benefits, is increasing out of all proportion to their ability to pay."

Help the Aged also expressed concern over pensioners' ability to pay the new rates.

Ofwat, the regulator for the water industry, has allowed suppliers across the UK to raise prices by an average of 18 per cent over the next five years to pay for £16.8bn of maintenance work and environmental improvement.

The increases are a third less than the water companies originally wanted, but above proposals published by Ofwat in August.

Charges will go up by £28 in the Northumbrian Water area, which stretches from the Scottish Borders to North Yorkshire, and by £14 for Hartlepool Water customers.

The price limits set by Ofwat exclude inflation, which means bills may, based on Treasury predictions, rise by 30 per cent.

Higher water bills are another blow for households who have had to cope with soaring gas and electricity prices, rising interest rates and petrol prices.

An inquiry by the Commons Environment, Food and Rural Affairs Committee heard that between two and four million households could not afford to pay their water bills. Its report, published on Wednesday, warned the issue of affordability would only get worse if bills rose further.

However, the increases were welcomed by the Environment Agency to help fund £3.5bn-worth of environmental projects.

Barbara Young, the agency's chief executive, said: "A good quality environment is a better place to live and a better place to do business.

"The payback for communities will be cleaner, healthier rivers that add value and appeal to their surroundings, create new opportunities for leisure and recreation and trigger knock-on economic and social benefits."

Northumbrian Water welcomed the move and said that improvements to drinking water quality and work to combat sewer flooding could now go ahead.