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The UK government is preparing new measures to stop senior executives of failing water companies from receiving bonuses through legal loopholes.
Although a ban on bonuses was introduced last year under the Water (Special Measures) Act, it only applied to “performance-related” bonuses paid by regulated water companies. As a result, several executives continued to receive large payments by labelling them as “retention payments” or by receiving money through parent or offshore companies.
Thames Water, which was barred from paying bonuses, is still planning to pay senior staff millions through retention payments linked to an emergency loan. Yorkshire Water’s chief executive also received more than £1 million through its parent company, while the boss of South East Water is expected to earn hundreds of thousands of pounds in bonuses despite major water supply failures. Similar payments were made at Wessex Water.
The new environment secretary, Emma Reynolds, is expected to bring forward tougher rules in a new water bill to close these loopholes. Under the proposed changes, water company executives would no longer be allowed to receive bonuses through parent companies, and companies will be prevented from relabelling bonuses to avoid the ban.
The government says water companies must follow both the spirit and the letter of the law. Ofwat has already blocked around £4 million in bonuses this year and is consulting on tighter rules.
Campaigners and MPs say the loopholes should have been closed earlier and have criticised water firms for continuing to reward executives while pollution and water supply failures persist.
