Industry regulators have locked horns with Thames Water over a proposed £83 increase in typical water bills, with Ofwat saying the company should hike up prices no more than £34 from next April.

However, recent rainfall has washed effluent into the Thames in London, killing thousands of fish and causing a terrible stench. This has renewed pressure on the German-owned water company to invest further in London's leaking sewers.

In Newbury, the sewage system - installed in the 1890s - is under massive strain from new housing estates springing up around town, but the £2.7 billion investment programme focuses almost wholly on improvements in London.

Ofwat's Philip Fletcher said: "I believe that these proposals are fair to customers and to the company, and would benefit the environment. The average rise in bills for Thames Water customers would be broadly the same as the average for England and Wales as a whole.

"I am convinced that after reviewing the company's business plan carefully it is necessary. It is essential to maintain a water service in which customers can have confidence."

Meanwhile, the search is on for a new reservoir in the south east to cope with housebuilding levels, and higher usage levels.