'Failing' water sector blasted by MPs as bosses pocket bonuses despite pollution crisis

The “failing” water sector needs “root-and-branch reform” to address the culture that is “deaf” to the crisis, MPs have warned. Parliamentarians on the Environment, Food and Rural Affairs (EFRA) committee said there is a cultural problem in the sector and called for “a major refresh of the incentives and drivers” and “much more regulated management of financial incentives for senior executives”.

MPs slammed the “failing” sector for being “deaf to crisis", despite providing an essential service to millions of Britons. Alistair Carmichael, chairman of the committee, said: “The water sector has a serious culture problem. Water companies are the keepers of a vital national infrastructure.

“They exist to provide an essential service to the public and to protect the environment. But these primary functions seem to have been forgotten. Amidst growing public outrage at the poor performance of water companies, some companies have been paying out high dividends to shareholders and excessive bonuses to their senior executives.

“Water companies’ complex and sometimes impenetrable financial structures, with their myriad subsidiaries, holding companies and parent organisations, seem to suggest that their purpose is less to provide a good service to their customers and more to allow them to juggle their finances and their increasingly unsustainable levels of debt.

“Meanwhile, an ineffective regulatory system has failed to protect customers, the environment and the financial stability of the sector. It has failed to ensure that companies invest in essential infrastructure and it has not encouraged long-term thinking.

“This has got to stop now. Trust and accountability in the water sector are very low. It is not acceptable that it has fallen to commendable citizen scientists to expose issues with local water resources. Environmental protection and the delivery of a reliable and safe water must be the first priorities of water companies and regulators.

“We want the country’s water sector to be fit for purpose. Now and in the long term. The Water Commission has got the opportunity to draw up the root-and-branch reforms necessary to ensure that the issues plaguing the sector are resolved. It must not shy away from bold proposals.”

EFRA’s report notes that bonuses totalling millions of pounds have been repeatedly paid to senior executives over many years despite poor performance, which they say “seriously diminish trust” and may fail to incentivise improvement.

It added that there has been “serious economic mismanagement of companies” and called for greater regulation of debt accumulation and debt management, saying that “a culture of relying on debt must never be allowed to arise again”.

Cat Hobbs, founder and director of public ownership not-for-profit We Own It, said: “The report calls for ‘root-and-branch reform’ of the water sector. We all know the ‘root’ cause of the water crisis is privatisation. So by ignoring public ownership as a solution, we will only ever get reform of the ‘branches’.

“Market competition just doesn’t work in a sector where so-called customers are unable to vote with their feet and switch suppliers. We’re a captive market with zero consumer choice and the private water bosses know this.

“With no competition and toothless regulation, shareholders and CEOs have been laughing all the way to the bank, whilst our rivers and lakes die from their raw sewage pollution."

A Department for Environment, Food and Rural Affairs spokesman said: “Our rivers, lakes and seas are polluted, and our water system is broken.

“As part of the plan for change, new legislation has banned unfair multimillion-pound bonuses for bosses at six water companies and launched a record 81 criminal investigations.

“This Government has also secured the largest investment into the water sector in history, with £104 bn in private sector investment to clean up rivers, lakes and seas and cut sewage by nearly half by 2030.”

A Water UK spokesman said: “Everyone agrees that the water system is not working, and we have been calling for fundamental reforms which allow investment to get quickly to where it needs to go.

“In the meantime, companies are focused on investing a record £104 billion over the next five years to secure our water supplies, end sewage entering our rivers and seas and support economic growth.”