Water bosses are set to be banned from receiving bonuses if a company has committed serious criminal breaches, the Environment Secretary has announced today.
Ofwat will be taking forward a consultation to define the criteria for a ban. That could include successful prosecution for a Category 1 or 2 pollution incident – such as causing significant pollution at a bathing site or conservation area – or where a company has been found guilty of serious management failings.
The ban would apply to all executive board members and Chief Executives and would be expected to come into effect later this year, subject to consultation. If taken forward, Ofwat would implement the measures by changing the conditions of water company licences. For water companies in England, this would be done using the powers given to the regulator through the Environment Act 2021.
Last year, 10 water bosses received bonuses totaling £2.5m.
The measures form part of the government’s long-term strategy to tackle pollution, clean up British waters, and ensure a plentiful supply for the future.
Environment Secretary Steve Barclay said:
No-one should profit from illegal behaviour and it’s time that water company bosses took responsibility for that.
Tougher action is needed to address poor performance by water companies, which is why I am pleased Ofwat is going further today on bonus payments. In cases where companies have committed criminal breaches there is no justification whatsoever for paying out bonuses. It needs to stop now.
I will shortly be setting out more detail on further steps to clean up our waters, including reducing the reliance on water company self-monitoring in order to hold them to account and drive the improvements we all need to see.
The change follows the Environment Secretary’s recent meeting with water company chief executives, where he set out his expectations on performance – and also builds on Ofwat’s announcement last year to tighten restrictions on bonuses.
The policy would be expected to apply to FY24/25 bonuses from April onwards – but the government is clear that companies should follow these proposed new criteria for FY23/24 bonuses on a voluntary basis.