- By Lucy Hooker
- Business reporter, BBC News
Water company executives may lose their bonuses in the future if the firm they run causes environmental damage, such as allowing illegal discharges of sewage to pollute a beach or river.
Environment Secretary Stephen Barclay said it was time for water company bosses to “take responsibility”.
Activists and opposition parties said they had been calling for caps on water bosses’ bonuses for some time.
Regulator Ofwat will hold a consultation on the proposal later this year.
This will determine whether the plan will continue and what kind of incidents would cost someone their bonus.
Barclay said the sanction should apply to any company that had committed “serious criminal offences”.
“Tougher action” was needed to address the “poor performance” of water companies, he said.
“Nobody should benefit from illegal behavior,” he said.
“In cases where companies have committed criminal wrongdoing, there is no justification for paying bonuses. It must stop now.”
If the plan goes ahead, it will affect bonuses for the April 2024/25 financial year and will apply to water companies in England and Wales.
From Monday, the regulator, Ofwat, has a number of other new tools available, designed to hold companies to account.
They include the ability to fine firms up to 10% of their turnover for providing poor customer service.
Public concern about the health of the UK’s rivers, lakes and beaches has increased in recent years, particularly around the impact of raw sewage discharges.
Anger has focused on private companies that manage water and wastewater supplies, particularly after an announcement last year that suppliers planned to increase water bills by around £156 a year by 2030 to help modernize aging infrastructure. of UK water.
Climate change and population growth are putting pressure on the UK’s water system, much of which was built decades ago
Last year, senior executives from five of the 11 water utilities that deal with wastewater received bonuses. But in the other six, they decided to abandon them, after pressure from activists.
The Department for Environment, Food and Rural Affairs (DEFRA) said incidents that could cost managers their bonuses could include the contamination of a bathing area or conservation area, or a company being found guilty of serious management failings. The rules will apply to executives and board members.
Labour’s shadow environment secretary, Steve Reed, said his party had been calling for regulator Ofwat to be given the power to block bonuses since last year.
“Once again Labor leads, Tories follow,” he said.
The Liberal Democrats said they had called for the ban to be even longer.
The party’s environment spokesman Tim Farron said Mr Barclay’s proposals did not go far enough and should include a ban on bonuses “regardless of criminal conviction”.
Ofwat has previously said it is looking for “a step change” in performance across the sector. Last year, Ofwat ordered firms to pay millions of pounds to families after they failed to meet key targets.
On Monday Ofwat said its latest review of the sector had found there were still too many cases where customers felt let down by their water company. Ofwat chief executive David Black said as a result the regulator was “putting water companies on notice to improve customer service”.
“Where we see failure, Ofwat can and will take action which can result in significant fines,” he said.
Fines for poor service levels were part of a range of new measures, including some around environmental protection, shareholder payments and executive pay, he said.
A spokesman for Water UK, the body that represents water companies, said the firms were offering record levels of help to customers, including financial support with their bills for two million households. “It is right that regulators have all the powers they think that they need to hold water companies to account,” the spokesman said. Water companies are determined to provide the best possible service to their customers and are currently providing unprecedented levels of support.”