Question to the Department for Environment, Food and Rural Affairs:

To ask the Secretary of State for Environment, Food and Rural Affairs, what steps he is taking to review (a) retention payments and (b) similar schemes used by water companies subject to a ban on bonuses.

Under the Water (Special Measures) Act, the Government has given Ofwat new powers to block unjustified payments.

The Government will not tolerate any company attempting to circumvent the ban on executive bonuses for poorly performing companies by introducing mechanisms such as salary increases or payments through parent companies. Ofwat’s definition of performance-related pay is clear; any payment, consideration or other benefit provided as a result of meeting targets and performance standards. Government is clear that it is important for water companies to be guided by the letter and spirit of this definition.

Ofwat has been asked to assess the legality of these arrangements: should Ofwat find any rule breaches, companies will face enforcement action which can include financial penalties.

Whilst Ofwat is closely monitoring the effectiveness of its rules on executive remuneration, the onus remains on companies to fully comply with both the rules and the intent behind them; namely, that executive pay should reflect company performance. The Secretary of State has written to all water companies reiterating the firm expectation companies are fully transparent over the entire remuneration package for executives.

The Secretary of State has been clear that customer money must be ringfenced and used solely to improve services and protect the environment. Ofwat has confirmed that infrastructure investment funds cannot be diverted to bonuses, dividends, or salary uplifts. These safeguards are part of a wider reform agenda to restore public confidence in the sector.