News
9 Water Firms Banned From Using Billpayer Money To Fund Bonuses
The UK’s water woes continue to gather pace, with ageing infrastructure wasting billions of litres of water per day and sewage discharges taking place with increasing frequency… and utility companies seemingly taking ineffective action to tackle their biggest issues.
As such, it is perhaps unsurprising that the news that shareholders are being paid significant amounts in dividends and that company bosses are still in receipt of bonuses despite woeful customer and environmental performance has not been welcomed particularly warmly.
In July, for example, two Yorkshire Water bosses received a combined £616,000 in bonuses for 2023, a year in which thousands of customers couldn’t carry on with daily life because of burst water pipes and a year where the company was named the second worst in England for sewage spills.
Looking at the industry as a whole, research by the Liberal Democrats shows that bonuses paid to water company executives across England and Wales rose to £91 million in 2023/2024, up by over £120,000 from the previous year… despite the fact that sewage was discharged into rivers, lakes and streams for 3.6 million years over the 12 months.
Ailing supplier Thames Water saw executive bonuses almost double, climbing from £746,000 in 2022 to reach £1.3 million in 2023, even though the company was on the edge of bankruptcy and its chief executive quit halfway through the year. The firm has just this month (November) won backing from lenders for a lifeline of £3 billion, giving it sufficient funds to continue operating until October 2025.
Lib Dem environment spokesman Tim Farron said in July: “It is a national scandal that these bonuses are being paid out by firms who disgustingly pollute rivers, lakes and beaches. These executives are pocketing more every year while sewage levels rise. Frankly, the whole thing stinks.”
Ofwat enforcement
The government’s new water (special measures) bill aims to crack down on water bosses polluting waterways around the country, giving regulator Ofwat and other agencies stronger powers to take tougher and faster action against firms found to be damaging the environment and failing their customers.
And it seems as though changes are already afoot, with the watchdog announcing on November 21st that nine water companies would be prohibited from using customers’ money to fund executive bonuses to the tune of £6.8 million.
Thames Water, Yorkshire Water and Dwr Cymru Welsh Water have all been blocked directly from allowing customers to foot the combined £1.5 million bonus bill, off the back of poor performance from all three suppliers. Ofwat will adjust costs for the companies so that they cannot later recoup it from billpayers.
For the remaining £5.2 million, the water suppliers involved have voluntarily decided not to push the cost onto customers, with shareholders paying it out instead.
David Black, chief executive of Ofwat, said: “In stopping customers from paying for undeserved bonuses that do not properly reflect performance, we are looking to sharpen executive mindsets and push companies to improve their performance and culture of accountability. While we are starting to see companies take some positive steps, they need to do more to rebuild public trust.
“Our new rules on exec pay and dividends link both to company performance. Through these new rules, our enforcement action and our incentive regime, which has imposed £430 million in performance penalties since 2020, we are challenging companies to deliver improvements for both customers and the environment.
“We will take forward further action under powers to regulate executive pay proposed in the government’s water (special measures) bill.”
The bill itself is currently receiving its third reading in the House of Lords, after which it will pass to the House of Commons before entering the final stages for consideration of amendments prior to Royal Assent being granted.
It’s possible that Ofwat’s powers may be strengthened even further, however, with Welsh Liberal Democrat MP David Chadwick now calling on the government to enshrine an outright ban on executive bonuses in law.
He observed that water firms have been “putting profit before people for far too long”, adding that the new Labour government now needs to listen to the Lib Dems and put a stop to the culture of sewage dumping and hefty bonus payouts, which come on top of “already inflated salaries”.