Thames Water drops plan to pay bosses bonuses from £3bn rescue loan
Thames Water has dropped controversial plans to pay bosses six-figure bonuses from its £3bn rescue plan following pushback from ministers.
Steve Reed, the Environment Secretary, told MPs that nobody should be 'richly rewarded for overseeing failure' after Sir Adrian Montague, the utility company's chairman, insisted the payments were needed to stop executives from being poached by rivals.
Mr Reed told a parliamentary select committee that Thames Water's retention payments had now been withdrawn.
He said customers were 'right to be furious about the rate of bonuses that chief execs were paying themselves for overseeing often catastrophic levels of failure'.
Speaking to the environment select committee, Mr Reed accused Britain's largest water company of trying to get around new rules that will allow regulator Ofwat to 'ban the payment of unfair and undeserved bonuses' by calling them retention payments.
He said: 'Just over the last few days, we've seen a very unfortunate situation where Thames Water appeared to be trying to circumvent that ban by calling their bonuses something different so that they could to continue to pay them.
'I'm very happy indeed that Thames have now dropped those proposals. It was the wrong thing to do. It offends against their own customer sense of fair play.'
His comments coincided with a letter published by the committee on Tuesday from Sir Adrian.
The Thames chairman said he may have 'misspoken' when he told the committee last week that the bonuses were 'insisted' on by creditors.
The debt-laden utility, which provides water and sewage services to 16m customers, secured a £3bn bailout earlier this year.
Sir Adrian told the select committee last week that 'this business, like many businesses, needs to reward its staff effectively'.
However, it has been teetering on the brink of collapse, with Sir Adrian saying in the same session that 'in the last year [it] has come very close to running out of money entirely'.
The Telegraph revealed over the weekend that Thames Water has also paid its lawyers up to £1,400 an hour, while its barrister pocketed almost half a million pounds in fees.
A Thames Water spokesman said: 'It has never been the Thames Water board's intention to be at odds with the Government's ambition to reform the water industry.
'Following recent discussions, the board has decided to pause the retention scheme and await forthcoming guidance from the regulator in relation to the implementation of the relevant aspects of the Special Measures Act, to ensure our approach supports both our turnaround objectives and broader public expectations.'
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