Government to ban bonuses for polluting water firms

The UK Government is set to impose a new ruling meaning that water company bosses cannot receive bonuses if their organisation has breached certain governance aspects, such as management failings or substantial water pollution.

Government to ban bonuses for polluting water firms

The sector has been has been in the media spotlight due to pollution and discharges.

The new proposals were laid out by Defra on Monday (12 February) and would stop bosses from receiving financial bonuses if their organisation had committed serious criminal breaches.

The Government cites causing significant pollution at a bathing site or conservation area serious management failings as two examples where bosses may be banned from bonuses.

Ofwat will enforce the new rulings, subject to a consultation set to take place later this year. The ban would apply to chief executives and all executive board members and is expected to enter into force later this year.

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.”

Last year, 10 bosses from the water sector received £2.5m in collective bonuses. Ofwat announced last year the tightened restrictions on bonuses.

The Environment Agency last year revealed that water companies sent storm overflows into English rivers and seas for more than 1.75 million hours in 2022.

The policy is expected to formally apply to 24/25 financial year bonuses from April onwards, but the Government states that water firms should follow the proposed criteria this year, on a voluntary basis.

In April last year, the UK Government unveiled plans for water companies found to be polluting the environment to face “unlimited” fines.

The Plan included a requirement for water companies to accelerate the delivery of key projects intended to improve water quality, boost water security and/or conserve and restore nature. A total of £1.6bn worth of work has been brought forward; shovels will now need to be in the ground by April 2025 and projects completed by 2030.

A total of 31 projects will be accelerated due to this change. These include £1.1bn of projects to reduce storm overflows and £160m of projects to reduce nutrient pollution resulting from sectors including agriculture and construction.

Another headline inclusion in the new Plan is changes to the enforcement of regulations on pollution and water wastage imposed on the water sector.

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