Water company bosses could see bonuses stopped over sewage spills

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UK
Protesters in London last yearGetty Images

Executives at water companies could lose their bonuses in future if the firm they run causes environmental damage, like letting illegal sewage spills pollute a beach or river.

Environment Secretary Stephen Barclay said it was time water company bosses “took responsibility”.

Campaigners and opposition parties said they had been calling for restrictions on water boss bonuses for some time.

Regulator Ofwat will run a consultation on the proposal later this year.

This will determine whether the plan will go ahead and what types of incidents would cost someone their bonus.

Mr Barclay said the sanction should apply to any company that had committed “serious criminal breaches”.

“Tougher action” was needed to address water companies’ “poor performance”, he said.

“No-one should profit from illegal behaviour,” he said.

“In cases where companies have committed criminal breaches, there is no justification whatsoever for paying out bonuses. It needs to stop now.”

If the plan does go ahead, it would affect bonuses for the financial year April 2024/25 and would apply to water companies in England and Wales.

From Monday the regulator, Ofwat, has a range of other new tools at its disposal, designed to hold companies to account.

They include the ability to fine firms up to 10% of their turnover for providing poor customer service.

Public concern about the health of the UK’s rivers, lakes and beaches has been growing over recent years, especially around the impact of raw sewage discharges.

Anger has focused on the private companies managing the water supply and waste water, especially after an announcement last year that suppliers planned to put water bills up by around £156 a year by 2030 to help modernise the UK’s aging water infrastructure.

Climate change and population growth are putting pressure on the UK’s water system, much of which was built many decades ago

Last year, senior executives from five of the 11 water companies that deal with sewage took bonuses. But at the other six, they opted to forgo them, after pressure from campaigners.

The Department for Environment, Food and Rural Affairs (DEFRA) said incidents that could cost executives their bonuses could include polluting a bathing site or conservation area, or a company being found guilty of serious management failings. The rules would apply to executives and board members.

Labour’s shadow environment secretary Steve Reed said his party had been calling for regulator Ofwat to be given the power to block bonuses since last year.

“Once again Labour leads, the Conservatives follow,” he said.

The Liberal Democrats said they had been calling for the ban for even longer.

The party’s environment spokesman Tim Farron said Mr Barclay’s proposals did not go far enough, and should include banning bonuses “regardless of criminal conviction”.

Ofwat has previously said it is looking for “a step change” in performance across the sector. Last year, Ofwat ordered firms to pay back millions of pounds to households after they failed to meet key targets.

On Monday Ofwat said its latest review of the sector had found there were still too many instances where customers felt let down by their water company. Ofwat chief executive David Black said as a result the regulator was “putting water companies on notice to improve customer service”.

“Where we see failure, Ofwat can and will take action which could result in significant fines,” he said.

The fines for poor levels of service were part of a range of new measures, including some around environmental protection, payouts to shareholders and executive pay, he said.

A spokesperson for Water UK, the body representing water companies, said firms were providing record levels of help for customers, including financial support with their bills for two million households.”It is right that regulators have all the powers they feel they need to hold water companies to account,” the spokesperson said. “Water companies are determined to provide the best possible service for their customers and are currently providing unprecedented levels of support.”

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