Minister pressures water boss to refuse rise doubling salary to £1.4m amid furious row over exec pay and sewage leaks - but rules out nationalisation

Daily Mail​

2 days ago

Southern Water's chief executive should refuse a pay rise that almost doubled his income to £1.4million, the Environment Secretary has said.
Steve Reed told the BBC 's Sunday With Laura Kuenssberg that Lawrence Gosden's £691,000 salary increase was 'outrageous' and implored the company to 'think about how this looks to their customers'.
It comes amid a furious row over the pay and bonuses enjoyed by executives at water utilities which oversaw huge spikes in sewage leaks last year.
The number of serious pollution incidents caused by water firms rose by 60 per cent in just 12 months, the Environment Agency revealed on Friday.
Asked whether Mr Gosden should turn down the pay rise, Mr Reed said: 'I think it would be right if he did .. I don't think Southern Water has performed well enough for that kind of pay increase to be merited.'
He added: 'Trust between the customers and the water companies is at the lowest point probably ever, and by paying their senior executives rises of that kind, what message are they sending to their customers?
'I really would urge them to think about this very, very, very carefully.'
The Government is bracing for the release of a landmark review into the water industry, which could reportedly lead to the abolition of embattled water regulator Ofwat.
The Independent Water Commission, led by former Bank of England deputy governor Sir Jon Cunliffe, will outline recommendations to turn around the floundering sector in its final report on Monday.
The review was commissioned by the UK and Welsh governments as part of their response to systemic industry failures, which include rising bills, record sewage spills and debt-ridden company finances, although ministers have ruled out nationalising companies.
The Government will respond to the recommendations in Parliament later on Monday.
The review reportedly includes proposals to establish a new system of regulation, which is currently split between Ofwat, the Environment Agency and the Drinking Water Inspectorate.
Ministers will announce a consultation that could lead to axing Ofwat, which oversees how much water companies in England and Wales can charge for services, according to the Guardian.
Ofwat has faced intense criticism for overseeing water companies during the years that they paid shareholders and accrued large debts while ageing infrastructure crumbled and sewage spills skyrocketed.
In an interview with the Sunday Times, Environment Secretary Steve Reed suggested he was in favour of a new model where regional boards managed water in their areas, including representatives from water companies, local authorities and other organisations.
He said: 'I think the catchment-based model has a lot to commend it. Because if you can manage what's going into the water better, you can clean up the water faster.'
But speaking to the BBC he again ruled out the possibility of nationalising the water industry, saying it would cost too much and take years during which pollution would get worse.
The Environment Secretary told the BBC's Sunday With Laura Kuenssberg: 'Nationalisation would cost upwards of £100 billion that we'd have to take away from the National Health Service and schools to give to the owners of the companies that are polluted.'
He added: 'If we try to unpick the current model of ownership, it would take years, and during that period, pollution would get worse because the companies wouldn't invest knowing that they were going to be nationalised.
The EA report found there were 2,801 sewage leaks last year, up from 2,174 in 2023.
Just three firms were behind 81 per cent of the most serious - Thames, Southern and Yorkshire.
The agency revealed consistently poor performance from all nine water and sewerage firms in the country despite its expectations for pollution incidents to decrease.
Meanwhile, just two companies – Northumbrian Water and Wessex Water – had no serious incidents last year, meeting the Environment Agency's expectations to see a trend to zero serious pollution incidents by 2025.
It also follows a report released by the Public Accounts Committee earlier on Friday, in which the cross-bench group of MPs called the level of pollution 'woeful' and recommended an overhaul of the regulation system.
Under the Water (Special Measures) Act introduced by the Government last year, the watchdog will have greater powers to take swift action against polluting companies.
To boost funding for water regulation, the Environment Agency is also consulting on a new levy on the water sector to recover the cost of enforcement activities, while the Environment Department (Defra) last week confirmed a 64 per cent increase in its funding from 2023/24.
A Water UK spokesperson said: 'While there have been some improvements, it is clear that the performance of some companies is not good enough.
'This is finally being put right, with a record £104 billion investment over the next five years to secure our water supplies, support economic growth and end sewage entering our rivers and seas.
'However, fundamental change to regulation is also needed. We hope that the recommendations of the Independent Water Commission next week will ensure the sector continues to get the investment it needs to drive down pollution incidents.'