All inclusive rents are very common in a city I lived in. In fact, potential tenants seem to expect or prefer them there and often ask if utilities are included in the rent!
Mumsnetters always treat landlords like modern day scrooges, out to swindle and wangle money from innocent tenants. From the above, apparently this landlord is a pervert who films his tenants in the bath, spies on them and evades tax, while trying to freeze them half to death.
Its a bit OTT, you know?
And yes, the landlord can insist his property is used for the purposes it is leased. A landlord can also insist overnight visitors are kept to a minimum. Even if it is not in the lease, because a lease is delectus personae and therefore based on the identity of the tenants involved and no-one else, such actions are outwith the terms of the lease. Often such things come down to a test of reasonableness, and I don't think you are acting reasonably in terms of your lease, particularly because its all inclusive.
Yes, it seems mean, but the landlord initially at least wouldn't have known how long this arrangement had been going on for, presumably wouldn't have known the unfortunate back story about your friend, and multiple washings and baths can cause electricity bills to skyrocket. Yes, I agree it does seem mean, but equally you are in breach of the terms of your lease and since bills are included in your rent, I think you acted a bit crassly. Could you not have simply said to him first, since he lives below, that a friend who was experiencing difficult for x reasons needed help for a few days, instead of all this?