Will the ban on water industry bonuses get flushed away?
'The era of profiting from pollution ends today,' declared environment secretary Steve Reed, taking aim at our deeply dysfunctional water industry.
Big talk – and it was backed up with a ban on bonuses for 10 top bosses as a result of the scandalous level of sewage pollution consumers have had to put up with.
Over the last 10 years, execs at the nine biggest water companies have had their wallets fattened by a combined £112m for running regional monopolies – badly. In just the last year, they've pocketed nearly £8m.
No wonder people are cross. If you want an example of why monopolies are a thoroughly bad thing, you've got it here. If you want a case study of why bosses' bonuses make people blow a gasket, you've also got it here.
The nearly 2,500 'sewage events' recorded over the 12 months can in part be traced to profoundly misaligned incentives. And also, it should be said, to Ofwat's continued failure to properly regulate the sector. If these companies received effective oversight, the current mess would not have been allowed to happen.
But back to the government's order, which will hit executives at the stricken Thames Water, Yorkshire Water, Anglian Water, Wessex Water, United Utilities, and Southern Water where it hurts: in the pocket.
'While it is for water companies to set their own remuneration, new standards published by Ofwat that come into force today mean bonuses will not be permitted to be handed out in specific cases when a water company fails to meet core environmental standards,' the government said.
Future bans will be imposed if a water boss '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'.
This will be a popular move from a government that needs to find a few winners. However – and you can call me a cynic if you want – there is a potential problem here.
Remember the EU's bankers bonus cap, limiting payments to 100 per cent of salary, or twice that with shareholder approval?
The net result of that rule, since jettisoned by the UK, was that affected institutions sharply increased the base salaries of their leading rainmakers. Some of them actually found they were really quite keen on having (much) larger pots of guaranteed money coming to them.
Executive pay is a multi-headed hydra. Cut off one of those heads – the bonus, in this case – and the others (basic pay, benefits, pensions) typically get bigger. I wouldn't be at all surprised to see some of the water companies attempting to push through big increases in basic pay for their execs, or more likely still, quietly increasing benefits and especially pension contributions. This will merit close attention.
Water bosses being handed fat pay rises will, of course, go down like a cup of cold sewage and generate an overflowing storm drain of controversy. But, given the tin ear the water industry has turned to its critics in the past, would anyone be all that surprised if one or two of these companies tried this? I wouldn't.
You can, nonetheless, file the bonus ban under 'easy win' for Mr Reed, who was out tub thumping on TV on the back of the announcement. He puffed out his chest, made himself look big and tough, and talked about promises being delivered.
It might be me, but isn't it just a little bit early for him to be saying that? Yes, he's had a good start on this one. I'm not denying that. But turning the water industry into something that works for both consumers and investors is a much tougher nut to crack.
Reed touted a £104bn pot of private investment – 'the largest ever since privatisation' – which, we are told, will be ring-fenced 'to cut sewage discharges by nearly half over the next five years', as opposed to being used for 'shareholder payouts'.
Things that make you go hmm. The money is certainly welcome. It is much needed. But what you have to remember is that private investors are not charities. They don't pump money into companies without the prospect of a return. They will require payouts at some point otherwise the money will dry up quicker than the water pouring out of a leaky Thames Water pipe on a hot summer's day.
The other thing to remember, with the water industry being in such a godawful mess, is that it's going to take some smart people to fix it. Preferably new people, untainted by previous scandal. These people tend to demand very high salaries.
If their incentives are properly aligned with the delivery of the services these companies are supposed to provide, it ought to be possible to deliver something that hasn't happened to date: an industry that works for all its stakeholders.
But Mr Reed, and a beefed up Ofwat, still have work to do on that front.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Sun
23 minutes ago
- The Sun
Huge fashion retailer with over 250 UK stores ‘drawing up radical rescue plan' with shops and jobs at risk
A HUGE fashion retailer with over 250 UK stores is reportedly drawing up a radical rescue plan which could see shops and jobs axed. The high street giant - which is being forced to restructure due to tough trading standards - employs around 5,500 people and was founded in London in 1948. 2 2 The chain's owners have brought in advisers from PricewaterhouseCoopers (PwC) to come up with money-saving solutions, reports Sky News. The proposals are expected to be finalised in a matter of weeks, though sources have reportedly claimed no decisions have been green lit on the retailer's future. Accounts for River Island Clothing Co for the year ending December 30 2023 showed the firm made a £33.2 million pre-tax loss. Then the turnover during the following 12 months fell by more than 19% to £578.1 million. The firm's latest accounts at Companies House, warned of growing financial and operational risks. "The market for retailing of fashion clothing is fast changing with customer preferences for more diverse, convenient and speedier shopping journeys and with increasing competition especially in the digital space," it said. "The key business risks for the group are the pressures of a highly competitive and changing retail environment combined with increased economic uncertainty. "A number of geopolitical events have resulted in continuing supply chain disruption as well as energy, labour and food price increases, driving inflation and interest rates higher and resulting in weaker disposable income and lower consumer confidence." In January, River Island hired consulting firm, AlixPartners, to undertake work on cost reductions and profit improvement. It's understood PwC has now taken over. Why are so many pubs and bars closing? In recent months, a number of River Island stores have been closing, including in Corby and Chesterfield. Originally named Lewis Separates and then Chelsea Girl, the chain was founded by Bernard Lewis in 1948 and became influential during the 1960s fashion scene, including the iconic mini-dress trend. It was re-branded as River Island in 1988 and throughout the next two decades expanded to become a leading high street force in the UK. It now has a presence in over 125 worldwide markets, in stores and online. Why are retailers closing shops? EMPTY shops have become an eyesore on many British high streets and are often symbolic of a town centre's decline. The Sun's business editor Ashley Armstrong explains why so many retailers are shutting their doors. In many cases, retailers are shutting stores because they are no longer the money-makers they once were because of the rise of online shopping. Falling store sales and rising staff costs have made it even more expensive for shops to stay open. The British Retail Consortium has predicted that the Treasury's hike to employer NICs from April 2025, will cost the retail sector £2.3billion. At the same time, the minimum wage will rise to £12.21 an hour from April, and the minimum wage for people aged 18-20 will rise to £10 an hour, an increase of £1.40. In some cases, retailers are shutting a store and reopening a new shop at the other end of a high street to reflect how a town has changed. The problem is that when a big shop closes, footfall falls across the local high street, which puts more shops at risk of closing. Retail parks are increasingly popular with shoppers, who want to be able to get easy, free parking at a time when local councils have hiked parking charges in towns. Many retailers including Next and Marks & Spencer have been shutting stores on the high street and taking bigger stores in better-performing retail parks instead. In some cases, stores have been shut when a retailer goes bust, as in the case of Carpetright, Debenhams, Dorothy Perkins, Paperchase, Ted Baker, The Body Shop, Topshop and Wilko to name a few. What's increasingly common is when a chain goes bust a rival retailer or private equity firm snaps up the intellectual property rights so they can own the brand and sell it online. They may go on to open a handful of stores if there is customer demand, but there are rarely ever as many stores or in the same places. The Centre for Retail Research (CRR) has warned that around 17,350 retail sites are expected to shut down this year.
The Independent
30 minutes ago
- The Independent
Jack Grealish is at a crossroads – and the next step is far from obvious
Sometimes a career can be measured by what happens over summers. In 2021, Jack Grealish became the most expensive Englishman in history, the Premier League 's record signing, the £100m man. In 2023, he was the treble winner whose celebrations in Ibiza felt the stuff of legend. In 2024, he was, to his surprise, omitted from England's European Championships squad. In 2025, it would be rather less of a shock if he is excluded from Manchester City 's Club World Cup squad. It could be seen as the rise and fall of Grealish. He may be deemed to be at a crossroads, though one interpretation is that he has reached a dead end, at least as far as City is concerned. Grealish, 29, has started one Premier League match in 2025, appeared for a grand total of four minutes in City's last seven top-flight fixtures and did not make the bench for their final-day win at Fulham. Pep Guardiola has said he dislikes having to leave players out of the matchday squad, that the players and the club have to find the 'best way' forward. He both wants a smaller squad and is busy making signings. Something has to give. Someone has to go. Leaving Grealish at home when City go to the United States would be an unsubtle hint that he will be the most high-profile casualty. Bidding farewell to him altogether could be a rather lengthier process. Grealish has two years left on his contract, wages that would be prohibitive to most other clubs and which would probably require City to substantially subsidise even a loan deal. The easy answer is to suggest Grealish returns to his beloved Aston Villa. Yet they are shorn of Champions League revenues next season and, in any case, possess more compelling choices in the attacking midfield spots: the Grealish of the last two years is an inferior player to Morgan Rogers, Jacob Ramsey and John McGinn. Grealish has the high profile and high fee, but has had a low output. The feeling is that he is aware of the criticism. In a social media post this week, Grealish argued he had scored in his last three appearances that lasted at least 45 minutes. It isn't entirely true – he omitted the FA Cup ties against Leyton Orient, Plymouth and Nottingham Forest – but it was an attempt to alter the perception. Except that the perception is true. He has one league goal since 2023. He did not score for City in any competition in 2024. The last two seasons have brought just five assists in total. The City Grealish can win free-kicks and retain possession – his pass completion rate in last season's Premier League was 91 per cent – but that may reflect the way the risk and excitement have been stripped from his game. And even Guardiola, who doesn't tend to judge players on goals, may have belatedly realised Grealish provides too few. He only really flourished as a City player with others delivering the goals and assists he didn't: of four seasons, only one has been a personal success. And in 2022-23, Kevin De Bruyne contributed an extraordinary 29 assists, Ilkay Gundogan got vital goals and, though none even started the Champions League final, Julian Alvarez, Phil Foden and Riyad Mahrez all scored at least 15 times. It remains to be seen how the post-De Bruyne era shapes up and who comprises the supporting cast and supply line to Erling Haaland. Yet, after City recorded their lowest tally of Premier League goals in a season under Guardiola, there seems a recognition that they require players who can make them prolific. The January addition Omar Marmoush scored 28 times last year, 20 of them for Eintracht Frankfurt. Of two proposed midfield additions, Tijjani Reijnders scored 15 goals for AC Milan last season and Rayan Cherki got 20 assists for Lyon, including the most (eight) of anyone in the Europa League. Then there is Grealish, the increasingly conservative dribbler. Jeremy Doku and Savinho have displaced him as the wide men who run at defenders. Meanwhile, central-midfield additions are likely to end Guardiola's brief experiments – against Forest and Juventus – of Grealish in a deeper role. It leaves him looking the odd man out. Which, again, should be no shock. Grealish has only started 17 of 76 league games for City since winning the Champions League. He ranked 19th in Premier League minutes for City last season, behind the January buys Nico Gonzalez and Marmoush. For Guardiola to have the compact squad he wants, he needs players who stay fit but Grealish has had two stop-start campaigns with injuries. For now, and perhaps permanently, there is the impression that the Guardiola and Grealish bromance is over. They were always the odd couple, the nerd and the Jack the lad. At City, there are plenty of examples of Grealish's common touch, his genuine concern for fans, but his fondness for a night out may have started to count against him. Or maybe it would have been forgiven if he were delivering on the pitch. He hasn't in the last two years, a reality which is compounded by his price tag. It made him a luxury in one respect; many of City's signings – and most of their finest ones – in the last decade came for between £35m and £65m. It also means City face a bigger loss. And any prospective buyer or borrower would have to factor in an adjustment period, to answer the question, can Grealish return to the player City bought? Because who, really, needs an attacking midfielder who has too little involvement in goals? Grealish would need a process of de-Guardiola-isation, to restore him to the free spirit from the player who was reprogrammed at City. The Kalvin Phillips precedent is scarcely encouraging. Another likeable Englishman has not recaptured the qualities that made him excel before he joined City. Grealish at least had the heights of the treble. But it came at the cost of making him a duller footballer. And, two years on, as he faces a personal summer of discontent, it is hard to see where he would fit in now.
Telegraph
32 minutes ago
- Telegraph
Why banks may no longer refund fraud victims
Lenders are lobbying for new fraud reimbursement rules to be watered down over fears scam victims are being told to lie to their banks. Since last October, companies which handle payments have been required to give victims of 'Authorised Push Payment' (APP) fraud their money back, up to a limit of £85,000. In the first three months, 86pc of money lost to the scams – approximately £27m – was reimbursed to consumers by 60 firms. The current rules mean that, other than a £100 'excess' which firms can remove from payments, the only reasons that customers can be denied a payout are if they've ignored warnings, failed to quickly notify their bank of the fraud, refused to share information about the scam or do not consent to a police report being made. But in meetings in May, banks demanded that requirements for victims to act reasonably – and not to lie to their bank – were made stronger. This would mean that customers could be denied refunds in more cases. The Payment Systems Regulator (PSR) will hold an independent review of the mandatory scheme in October, and will then recommend changes. Problems raised include the high reimbursement limit, compliance monitoring by which administers the scheme, and the limited number of exemptions for refusing payouts. Lenders also said they should be able to give clear warnings about lying to them, as victims are often guided to do by fraudsters. One bank told industry magazine The Banker that: 'The [consumer negligence] bar is set so high that in almost all these cases a customer can be incredibly reckless, can lie to their bank, can ignore warnings and still get their money back.' Riccardo Tordera, director of policy and government relations at The Payments Association (TPA), said: 'The PSR says just 2pc of claims are rejected on this basis yet acknowledges no clear shift in consumer behaviour. 'Meanwhile, the Financial Ombudsman Service and the PSR both apply a stricter definition of gross negligence than common law, which could make enforcement of reimbursement policies challenging in a British court.' Under the previous voluntary code – called the Contingent Reimbursement Model (CRM) – customers could be refused for ignoring warnings or failing to verify the payee. Now the test is much stricter. Reimbursement numbers never jumped above 75pc under the old scheme – compared to 86pc for the mandatory payouts. APP scams see victims convinced to move their money themselves, eventually into a 'safe' account controlled by the fraudsters, at which point it is lost. Ticket sale scams, such as those experienced by Oasis and Taylor Swift fans, are also considered APP frauds. At first glance, the implementation has gone well. The amount lost in APP frauds dropped by 2pc between 2023 and 2024, according to UK Finance, and the number of cases fell by a fifth. But £450.7m was still lost to fraudsters last year. But the scheme has not been without its critics. Before the scheme was implemented, some parts of the industry warned of the potential problems of moral hazard – which is when consumers are incentivised to lie – and that fraudsters would pose as victims. This, it was claimed, would drive a significant spike in claims. But these fears have not materialised. Originally, the reimbursement limit was set to £415,000 – with firms expected to pay out just days after claims were made. But lobbying saw the limit dropped to £85,000, the same as the Financial Services Compensation Scheme (FSCS), which protects money deposited with banks. Smaller and medium-sized payment companies had said that one large claim could wipe them out. David Geale, managing director of the Payment Services Regulator (PSR), which is responsible for the scheme, said in May that: 'While it is too early to draw firm conclusions based on the period covered by this data, we have not seen evidence of spikes in claim volumes that some had feared would occur under the policy.' Before the scheme was introduced, there was a voluntary code which most of the major banks were signed up to, run by the Lending Standards Board. Sources at the LSB said last year, before reimbursement was mandatory, that they had not seen fraudulent claims. Rocio Concha, director of policy and advocacy at Which?, said: 'Based on the available data from the PSR, the new mandatory scheme appears to be performing well, with more fraud victims getting their money back. 'Sections of the industry had tried – without producing any evidence – to claim that mandatory reimbursement would lead to consumers acting irresponsibly or even teaming up with criminals to con banks out of cash. This seemed ludicrous at the time and initial insights have borne that out.' Ms Concha added that while the number of cases were down, there was another worrying trend. She said: 'Latest industry figures suggest more victims are being tricked into sending money to bank accounts overseas controlled by fraudsters. That is concerning as these transfers aren't covered by the new mandatory reimbursement rules.' A spokesman for the PSR said: 'We have always been clear that we would have an independent review following the implementation of the policy. 'If we think there are key learnings or adjustments to make to our policy, we will consider those carefully before making any changes.'
