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Senior water executives face being imprisoned for up to two years if they obstruct an Environment Agency or Drinking Water Inspectorate investigation under new legislation being introduced to parliament on Thursday.
Regulator Ofwat will also be given additional powers to set rules concerning performance-related pay after the water monopolies awarded their chief executives a total of £41mn in bonuses, benefits and incentives since 2020, the government said ahead of the bill being tabled.
The water (special measures) bill is the government’s attempt to respond to the mounting crisis at water companies, which are facing the biggest wave of protests over sewage pollution since privatisation 34 years ago.
The legislation will give Ofwat the powers to block or remove directors or chief executives if the regulator decides they do not meet high standards of “fitness and propriety”. It could lead to much higher penalties for frequent, minor offences that are currently capped at £300.
With mounting concerns about the potential collapse of Thames Water, ministers are also updating the “special administration regime” so that any surplus costs of doing this form of temporary nationalisation fall on a failed company’s bill payers rather than all taxpayers.
The industry wants legislation to improve the resilience of Britain’s water supply — but that will not occur until later in the parliament, officials have confirmed. Despite growing concerns about the country’s vulnerability to water shortages, the UK has not built a new reservoir in the past 32 years.
Steve Reed, environment secretary, said the public were “furious” about unacceptable levels of sewage in waterways. “Under this government, water executives will no longer line their own pockets whilst pumping out this filth. If they refuse to comply, they could end up in the dock and face prison time.”
Other measures previously announced include a requirement for water companies to start installing monitors on an additional 7,000 emergency storm overflow pipes that tip raw effluent into the sea. These are separate to the combined storm and sewage overflow pipes, which are already required to have monitors installed.
Feargal Sharkey, a prominent anti-sewage campaigner, said the announcement was a “long list of measures that will cost nothing and won’t change anything”.
“All of these measures are already included in the existing laws, which could be enforced with vigour and enthusiasm. What was needed was decisive reform and transformative action and there is nothing in here that will deliver anything like that.”
Ministers are concerned about the potential financial collapse of Thames Water, Britain’s largest — and most indebted — water company, which has warned that it will run out of cash by May if it does not receive fresh equity by the end of the year.
The government is updating the special administration regime (SAR) so that water companies are required to inform the government before they declare insolvency.
The government is also giving itself new powers to cover the costs of any SARs from water-bill payers if it does not recover the cost through a sale of the business.
Under the usual SAR process — used after the collapse of energy company Bulb — the government provides upfront funding that is then recovered if and when the business is sold to another private company.
Matthew Topham of We Own It, a pressure group that calls for renationalisation, said the government was “simply washing its hands of the sewage scandal” and leaving households to “pick up the tab”.
Water companies are under fire for paying out lucrative executive pay packages and more than £78bn in shareholder dividends in the 32 years between privatisation in 1991 to March 2023, according to research by the Financial Times.
At the same time they piled on £64bn net in debt, despite being sold at privatisation with no borrowings, and failed to use that to invest adequately in infrastructure, leading to massive sewage spills into rivers, lakes and coastal waters, risking public health.
Industry body Water UK said: “We agree with the government that the water system is not working. Fixing it requires the government to deliver the two things which it has promised: fundamental regulatory reform and speeding up investment. Ofwat needs to back our £105bn investment plan in full to secure our water supplies, enable economic growth and end sewage spilling into our rivers and seas.”