Water industry bosses were blocked from pocketing more than £6.5 million in bonuses over the past year, thanks to a ban triggered by their companies’ failures.
Watchdog Ofwat revealed nine firms in England and Wales performed badly enough that their CEOs could not accept extra cash under a rule introduced by Labour.
The failures spanned a range of issues, including severe pollution, breaching duties to consumers and – in the case of Welsh water company Dŵr Cymru – three criminal convictions.
Among the bosses missing out is Lawrence Gasden, the Southern Water CEO who was at the centre of a storm last year over a pay rise worth hundreds of thousands of pounds.
If the firm had awarded him the maximum bonus possible – 150% of his base salary – Gosden would have bagged more than £800,000 this year.
Alongside Southern and Dŵr Cymru, the other impacted companies were Anglian Water, Northumbrian Water, Severn Trent Water,South West Water, Thames Water, Wessex Water, and Yorkshire Water.
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However, Ofwat also highlighted that some bosses were getting hefty amounts of money in other forms, such as unusually large boosts in their pay.
Thames Water CEO Chris Weston got a 14% pay rise this year, while the same firm’s CFO Steve Buck got an increase of 26%.
Such significant hikes risk ‘damaging public trust and creating a perception that companies are circumventing the [bonus ban] rule’, the regulator warned.
A review of the ban has been accelerated as a result, with Ofwat looking into how to combat the risk of it being undermined.
Environment Secretary Dame Angela Eagle said: ‘People are sick of seeing water bosses profit while rivers are polluted and customers are repeatedly let down.
‘A wide-ranging review launching today will ensure that failure doesn’t pay, whatever name the payment goes by.
‘The bonus ban was the first step. Where there are loopholes, I want them closed.’
This is the second year in which the ban rule has been in effect, with around £4 million in bonuses blocked last year too.
The rule prevents bosses from getting a cash boost if their firms fail to meet standards on consumer matters, the environment, financial resilience, or criminal liability.
Ofwat itself is facing dramatic changes after the government pledged to abolish it in July last year.
The Department for the Environment, Food and Rural Affairs confirmed work is ongoing to establish the form of the new regulator and it will be a centrepiece of the Water Bill, which is yet to be introduced in Parliament.
Prime Minister Andy Burnham, who has called for stronger public control of the water industry, last week announced eight English ‘water councils’ to allow local people to set priorities for their area.
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