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06
Jun
Government bans 'unfair' bonuses for Yorkshire Water bosses
Labour has today banned "unfair" bonuses for Yorkshire Water’s bosses.
As part of new measures under the Water (Special Measures) Act, senior executives at six water companies, including Yorkshire Water, will no longer receive unfair bonuses from today (June 6).
Under the new rules, companies are not permitted to pay bonuses to bosses of water companies that oversee poor environmental and customer outcomes.
The changes have been backdated to apply to any bonuses in relation to the financial year from April 2024, when water bosses in England received a combined total of £7.6 million in bonuses.
Locally, the new rules mean Yorkshire Water’s chief executive, Nicola Shaw, and chief financial officer, Paul Inman, are banned from receiving unfair bonuses.
Ms Shaw came under fire after being awarded a £371,000 bonus last year, despite criticism over sewage overflow failures and a downgrade in the company’s environmental performance.
The bonus was on top of her £585,000 salary and £72,000 in additional benefits.
Ms Shaw defended the bonus to MPs on the House of Commons’ environment, food and rural affairs select committee in February.
She said at the time:
My shareholders and the board of Yorkshire Water decided through their renumeration committee to set us really stretching targets for a number of things. In particular, we improved and continued to improve on leakage, and in relation to our staff engagement and staff safety, and they wanted to reflect that in what had been quite a difficult year.
But they also recognised that we had done nowhere near well enough in relation to our outcomes in the environment and therefore removed any bonus related to the environment. But I do accept that it is a large number.
Water companies have been awarded more than £112 million in bonuses and incentives over the last decade.
The new rules also apply to executives at Thames Water, Anglian Water, Wessex Water, United Utilities and Southern Water, but companies that meet Ofwat’s standard will still be eligible to pay bonuses.
The government today described the move as a “powerful incentive for them to deliver immediate environmental improvements, better customer outcomes and improve financial resilience.”
Environment secretary, Steve Reed, said:
Water company bosses, like anyone else, should only get bonuses if they’ve performed well, certainly not if they’ve failed to tackle water pollution.
Undeserved bonuses will now be banned as part of the Government’s plan to clean up our rivers, lakes and seas for good.
Promise made, promise delivered.
Ofwat rules
Following a consultation earlier this year, Ofwat has also published a new set of rules in line with today’s changes.
The rules mean any company that fails to meet key standards will automatically lose the right to award bonuses.
Water companies must meet new standards set by Ofwat, which have come into force today, to be eligible for executive bonuses.
A company will not be permitted to hand out bonuses if it:
- Fails to meet core environmental standards and presides over serious pollution offences
- Fails to meet basic financial resilience standards (e.g. meet minimum credit rating requirements)
- Fails to meet core consumer standards (e.g. failure to operate and maintain sewage networks)
- Is convicted of a criminal offence (e.g. criminal convictions for serious environmental failings including illegal spills)
Ofwat also has the power to claw back any bonuses paid to executives while the company is banned and has pledged to carry out enforcement action against companies that fail to comply with its directions.
The government today announced it has secured a £104 billion private investment in a bid to cut sewage discharges by nearly half over the next five years.
The money will be ringfenced for new pipes and treatment works, not shareholder payouts, Labour has promised.
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