- Written by Lucy Hooker
- BBC News business reporter
image source, Getty Images
Demonstrators in London last year
Water company executives could lose future bonuses if their companies cause environmental damage, such as by polluting beaches or rivers with illegal sewage spills.
Environment Secretary Stephen Berkeley said it was time for water company executives to “take responsibility”.
Activists and opposition parties said they had been calling for limits on bonuses for water managers for some time.
Regulator Ofwat is expected to hold a consultation on the proposals later this year.
This will determine whether the plan will be implemented and what type of incident will result in the loss of the bonus.
Mr Barclay said sanctions should be applied to companies that committed “serious criminal acts”.
He said “tougher action” was needed to address the “underperformance” of water companies.
“No one should profit from illegal activity,” he said.
“There is no legitimacy in giving out bonuses when a company commits criminal activity. It should stop now.”
If implemented, the plans will affect bonuses for the April 2024/25 financial year and will also apply to water companies in England and Wales.
From Monday, regulator Ofwat has a range of other new tools at its disposal designed to hold companies to account.
This includes imposing fines of up to 10% of turnover on businesses that provide poor customer service.
Public concern about the health of Britain's rivers, lakes and coasts has increased in recent years, particularly regarding the impact of untreated sewage discharges.
Specifically managing water and wastewater, after suppliers announced last year that they planned to increase water bills by around £156 a year by 2030 to help modernize Britain's aging water infrastructure. Anger is focused on private companies.
Climate change and population growth are putting pressure on Britain's water system, much of which was built decades ago.
Last year, executives at five of the 11 water companies that handle wastewater received bonuses. However, the remaining six locations chose not to do so after pressure from campaigners.
The Department for Environment, Food and Rural Affairs (DEFRA) said incidents that could lead to executive bonuses being lost include the contamination of beaches or nature reserves, or companies being found guilty of serious mismanagement. He said that it would be possible. This rule also applies to executives and directors.
Labour's shadow environment minister Steve Reid said his party had been calling for regulator Ofwat to be given powers to block bonuses since last year.
“Once again Labor is in the lead, followed by the Conservatives.”
The Liberal Democratic Party also said it had long called for a ban.
The party's environment spokesman, Tim Farron, said Mr Barclay's proposals did not go far enough and said they should include a ban on bonuses “regardless of conviction”.
Ofwat previously said it was seeking “step change” in performance across the sector. Ofwat last year ordered businesses that failed to meet key targets to repay millions of pounds to households.
Ofwat said on Monday its latest research into the sector found there were still too many instances where customers felt let down by their water companies. Ofwat chief executive David Black said as a result the regulator was “notifying water companies to improve customer service”.
“If there is a failure, Ofwat can and will take action that could result in significant fines,” he said.
He said the fines for poor service levels were part of a series of new measures, including those related to environmental protection, shareholder payments and executive remuneration.
A spokesperson for Water UK, the body representing water companies, said companies were providing record levels of support to customers, including helping 2 million households with their bills. “The regulator is right to have all the powers it feels necessary and water companies must be held accountable,” the spokesperson said. “Water companies are determined to provide the best possible service to their customers and are now providing an unprecedented level of support.”
