MPs condemn water regulators — as utility chief gets double pay boost

Times

17-07-2025

MPs have accused Ofwat and the Environment Agency of being 'missing in action' while water bills rise, as the boss of Southern Water saw his pay package almost double to £1.4 million.
In a highly critical report on water regulation, the public accounts committee said the sector was 'failing', in a 'farcical state' and being 'left to flounder' by the government. At the same time, environmental campaigners representing millions of people called on ministers to 'end the sewage scandal' by systemically transforming the industry.
The interventions come just three days before the recommendations of a government-ordered independent review of water regulation, billed as the biggest shake-up since privatisation in 1989.
The committee said that with water bills rising at their fastest rate in real terms since 2005 and customer trust in water firms at its lowest since 2011, a 'complete overhaul' of the sector was needed. Water bills are expected to rise by an average of £31 per household each year until 2030, with the true figure even higher after inflation.
'The monumental scale of work required to reverse the fortunes of failing water companies is rivalled only in difficulty by the efforts needed to repair customers' faith in the sector,' said Sir Geoffrey Clifton-Brown, chair of the committee and Conservative MP for North Cotswolds.
The environmental performance of water companies is 'woeful', the MPs said. They noted that the Environment Agency found breaches in more than a quarter of 4,600 inspections at sewage treatment works last year, including 92 serious ones. Sewage spills into rivers and seas last year rose to a record duration of 3.61 million hours — equivalent to more than 400 years.
The committee said companies were not doing enough to explain to bill payers what £104 billion of investment over the next five years will achieve. It said Ofwat must issue guidance, before the end of the year, to make firms outline what improvements the price rises are paying for.
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The MPs said Ofwat had also failed to ensure the financial resilience of water companies, allowing them to build up too much debt and pay out too much in dividends. Ten companies did not earn enough income in the 2023-24 financial year to cover their debt interest payments.
Thames Water, which is struggling under £16.8 billion of debt, this week warned it would collapse into emergency nationalisation if the government did not waive billions of pounds of fines.
Southern Water, which is also facing financial challenges, awarded its chief executive, Lawrence Gosden, £691,200 under a two-year incentive plan and £687,100 in fixed pay for the utility's last financial year. Gosden was among leaders at six water firms that recently had their bonuses banned by government for poor performance. His would have been worth £396,475, company filings this week revealed.
Helena Dollimore, the Labour MP for Hastings and Rye, said: 'There is no justification for Southern Water hiking up their CEO's pay cheque after the Labour government banned his bonus.'
However, Southern Water said that the award to Gosden was not a bonus but from a 'long-term incentive plan' set up in 2023. It was also for before the period covered by the government ban. The company was rescued from financial collapse and a potential temporary renationalisation during the pandemic.
This month Macquarie, the Australian investor, and co-investors agreed to inject up to a further £1.2 billion to help Southern Water through its present five-year spending cycle.
The public accounts committee found that the Environment Agency and Ofwat had made water firms pay out £430 million in penalties for wrongdoing over the last five years. However, the agency reported it was facing a 'justice gap' where some cases were not pursued because there were so many suspected violations and prosecution was too expensive.
The MPs also found a water restoration fund created last year, designed to spend water company fines to pay for improvements of waterways, had still not distributed its £11 million pot. They said it should be disbursed by the end of the year.
Separately, charities including Surfers Against Sewage, Greenpeace and River Action have written to Steve Reed, the environment secretary, asking him to put 'environmental good' before 'private profit'.
'Coastal economies and communities are being hammered. Rivers declared ecologically dead. Pollution poisoning our wildlife. Thousands of people are falling ill after swimming in raw sewage,' they said in an open letter.
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'Yet water bills will keep rising — to service debt, to fund dividends — and so it is the public who will continue to pay the price,' said the green groups, which also includes Wildlife and Countryside Link, an alliance including the National Trust and RSPB. The signatories said that together they represent 8.9 million British people.
The Times's Clean it Up campaign has been calling for stronger regulation to help Britain's rivers and seas.
An Ofwat spokesman said: 'We are clear that change is needed, and the independent water commission is a key opportunity to help rebuild public trust.'
A Water UK spokesman said: 'We agree that fundamental change to regulation is needed.'
The government and the Environment Agency were contacted for comment.