Ofwat is facing calls to completely ban bonuses for the bosses of water companies after it raised concerns over executive payouts at three English suppliers.
The water regulator has said that, having assessed the bonuses paid last financial year at 16 companies across England and Wales, it found those at Severn Trent, South West Water and Portsmouth Water were not “substantially linked to stretching delivery for customers and the environment”.
However, it is not able to claw back the payouts to the three companies’ executives.
Water suppliers have been repeatedly criticised for paying out large sums to bosses who have presided over leaky infrastructure and dumped sewage in Britain’s waterways.
The government and Ofwat have also faced anger for not acting sooner to tackle the crisis in the water industry.
The regulator said in June that water companies would not be able to use money from customer bills to pay executive bonuses this financial year if “they have not been sufficiently justified”. It will also use new powers to block shareholder payouts if companies fail to hit performance and environmental targets.
On Wednesday, Ofwat said that, in the last financial year, senior executives of six companies refused a bonus for 2022-23, and at five other companies, executive bonuses were paid for by shareholders, not customers.
The watchdog’s chief executive, David Black, said: “It is welcome that a number of companies responded to our calls for a change in how bonuses are awarded. But we want to see more transparency around this and if companies do not meet the criteria we have set out, from next year we will intervene to block customers from paying for these bonuses.”
The Liberal Democrats’ environment spokesperson, Tim Farron, said: “The British public will be reading this and screaming at regulators to just get on with banning these insulting bonuses.
“Every penny spent on exec bonuses is less money being used to upgrade creaking infrastructure. Enough is enough. Ban all water firm exec bonuses and ensure funds go straight into fixing leaking pipes. Bonuses should be a reward for success, not environmental vandalism.”
A string of water bosses publicly turned down their bonuses earlier this year. However, the move by the Thames Water chief, Sarah Bentley, was labelled a “flimsy PR stunt” as her total pay package swelled. She left soon after amid a financial crunch at Britain’s biggest water company.
The bosses of South West Water and Portsmouth Water rejected their bonuses this year, while Severn Trent’s longstanding chief Liv Garfield received a smaller payout, albeit still taking home more than £3.2m.
Nearly £10m in bonuses were still paid last financial year, up £876,000, according to a new analysis by the Liberal Democrats.
The anti-sewage campaigner Feargal Sharkey said: “Ofwat proves yet again that it lives in its own little fantasy world. ‘Crack down on exec pay’ screams the regulator on the very same morning it’s announced that water company executive basic pay actually increased to £10m. Did someone forget to tell the industry about the crackdown?”
The Portsmouth Water chief executive, Bob Taylor, said: “We have proactively engaged with Ofwat over some of the details and updated our bonus scheme as a result of Ofwat’s comments.”
A spokesperson for Severn Trent said: “We welcome the feedback from Ofwat and will continue to engage with them on our approach to remuneration policy. Around 75% of executive pay is variable and linked to a range of targets which are stretching and can only be achieved by continuing to deliver an industry-leading performance for customers and the environment.”
South West Water has been approached for comment.
