- Bonuses tied to environmental harm
- Ofwat consults on proposal
- New accountability tools introduced
Bonuses may be withheld from water company executives if their companies cause environmental harm, such as allowing unauthorised sewage spills to contaminate rivers or beaches.
Stephen Barclay, the Environment Secretary, stated that water company executives “must take responsibility.”
Activists and opposition parties have long demanded restrictions on water company executive bonuses.
The regulator Ofwat will consult on the proposal later this year.
This will determine whether the plan proceeds and which incidents will trigger bonus forfeiture.
Mr Barclay said organisations committing “serious criminal breaches” should face this sanction.
He emphasised the need for “tougher action” to address water companies’ poor performance.
He argued, “No one should profit from illegal behaviour.”
“In cases of corporate criminal breaches, paying bonuses is wholly unjustifiable.” “It must stop now.”
If implemented, the proposal will affect incentives for the fiscal year April 2024/25 and apply to water companies in England and Wales.
From Monday, Ofwat will have new tools to hold companies accountable, including fines of up to 10% of a company’s turnover for poor customer service.
Concerns about the state of UK rivers, lakes, and coastlines have grown, especially regarding raw sewage discharges.
The water supply and wastewater management companies have faced criticism, particularly after announcing plans to raise water bills by about £156 annually by 2030 for infrastructure upgrades.
The UK’s water infrastructure, largely built decades ago, is under pressure from population growth and climate change.
Last year, senior executives from five of the eleven sewage-handling water companies received bonuses, while the remaining six declined theirs due to campaigner pressure.
Tougher Rules for Water Exec Bonuses
DEFRA said incidents like contaminating a conservation area or being found guilty of severe management failures could lead to executive bonus forfeiture. The rules would apply to executives and board members.
Steve Reed, Labour’s Shadow Environment Secretary, noted that Labour has called for Ofwat to have the power to withhold bonuses since last year.
The Liberal Democrats claimed they had advocated for a longer ban on bonuses.
Tim Farron, the party’s environment spokesperson, said Mr Barclay’s proposals were insufficient and should ban bonuses “regardless of criminal conviction.”
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Ofwat has called for a “significant transformation” in industry performance, having ordered companies to refund millions to households for missing targets last year.
Ofwat’s latest sector assessment found many customers dissatisfied with their water provider. CEO David Black warned that Ofwat would take action, including significant fines, against failures.
He mentioned penalties for poor service among new measures, also addressing shareholder payouts, executive bonuses, and environmental protection.
A Water UK spokesperson said companies are providing unprecedented support to customers, including bill assistance for two million households, and agreed regulators should have necessary powers to hold companies accountable.
Water companies aim to deliver the highest possible service quality to their customers.
