The government is set to close loopholes that have allowed bosses of failing water companies to continue receiving large bonuses despite a ban introduced last year. The previous environment secretary, Steve Reed, attempted to prohibit failing firms from paying bonuses to chief executives and chief financial officers under the Water (Special Measures) Act. However, the legislation only covered 'performance-related' bonuses from specific regulated companies, enabling firms to bypass the ban by relabelling payments or channelling them through parent companies.
Examples include Thames Water, which plans to pay top staff millions in 'retention payments' from a high-interest loan after its bonuses were banned. Yorkshire Water's chief executive, Nicola Shaw, received £1.3m from an offshore parent company over two years, while South East Water's David Hinton is on track for £400,000 in bonus pay by 2030 despite widespread water outages. Wessex Water's former boss Colin Skellett also received a £170,000 bonus from a parent company in the same year the ban applied.
Emma Reynolds, the new environment secretary, is expected to introduce tough measures to close the loophole as part of a new water bill in May. The Department for Environment, Food and Rural Affairs warned companies to operate within the spirit of the law, but a source said a further crackdown is needed. Under new plans, water CEOs would not be allowed to receive bonuses via parent companies, and Ofwat will tighten criteria for what constitutes a 'failing' company.
Water minister Emma Hardy stated: 'It seems simple to me that bonuses should reflect performance, and if performance is not good enough, people should not get a bonus.' Ofwat confirmed that £4m in bonuses had been blocked this financial year despite the loopholes, and it is consulting on further changes. Campaigner Feargal Sharkey said the loophole was obvious from the start, while Liberal Democrat MP Mike Martin called the situation 'outrageous'.
