Water company bosses should be stripped of their multimillion-pound bonuses until they fix leaks and build reservoirs, politicians and campaigners have said as the country is gripped by drought.
With parts of England the driest they have been since records began – after five months of below-average rainfall – some homes have run out of water, rivers have turned dry and farmers are facing crop failures. Many are outraged at the companies for failing to invest in reservoirs, fix leaks and stop sewage pollution from their pipes.
The bosses of England’s water companies have been criticised for banking £58m in pay and benefits over the last five years. Since privatisation, shareholders have been paid £72bn in dividends. The cash came from big debts, with companies borrowing £56bn, and big bills, with prices rising 40%.
Stuart Singleton-White, head of campaigns at the Angling Trust, said: “The profits being made by water companies, who are in effect private monopolies, the dividend payments to shareholders, the inflated salaries and bonuses to the CEOs, and the debts that have been run up by these companies, mostly to support dividends and inflated salaries, rather than finance investment, is a clear sign this is a broken market.”
He pointed out that no new reservoirs have been built in England since water companies were privatised, and that years of underinvestment had led to “unacceptable levels of leaks”. Water companies currently leak around a quarter of their supply through old pipes, with 2,954m litres a day seeping away last year.
“When the crisis hit, our water system was not ready”, Singleton-White said, blaming “the greed of the water companies, the weakness of the regulators and the complacency of the government”.
Even some Conservative MPs are saying that the money water company bosses make is “unacceptable”. Former environment minister Rebecca Pow, who had water in her remit, said that the regulator should be taking stricter action and giving companies hefty fines.
She told the Guardian: “These salaries are unacceptable if they can’t with a clear conscience provide clean, plentiful and sustainable water.
“But this is also up to the regulator.”
She added: “We also have the opportunity to charge the water companies 10% of their turnover in fines, so we should look into that.”
Feargal Sharkey, the former Undertones singer who is now a rivers campaigner, agrees that the companies should face hefty fines, but pointed out that it is within government control to do this.
He said: “What [the environment secretary] George Eustice needs to do is something the government has had the power to do for 30 years – put in place an enforcement order where they can legally demand that water companies do things exactly at the government’s choosing and when the government wants.”
Sharkey added:“If water companies were losing 10% of their annual income, that would focus minds, wouldn’t it?”
Campaigners have argued that privatisation is not working, as England is an outlier on the world stage with fully privately owned and run water companies that are increasingly criticised for not investing in infrastructure.
The Green party is calling for water companies to be nationalised. Caroline Lucas, MP for Brighton, said: “Water company bosses are taking home gigantic pay packets and gifting themselves obscene bonuses, and shareholders are raking in huge dividends – meanwhile, what the rest of us are getting in return is widespread water leakage, chronic under-investment and raw sewage dumped in our rivers.
“The sooner we bring water companies back into public hands, the better. But that’s not enough – it’s now more urgent than ever to introduce legislation on pay ratios to enact the longstanding Green policy of ensuring bosses earn no more than 10 times the salary of the lowest paid in their companies, so that the grotesque inequalities in our society are finally tackled.”
Eight of the 14 areas of England are now classified as being in drought, with hosepipe bans being implemented across increasing areas of the country.
The Liberal Democrats first called for the ban on water company bonuses last week, and on Monday the party’s environment spokesperson, Tim Farron, told the Guardian: “Wealthy water company execs are profiteering off Britain’s rusting water infrastructure. They are handing themselves multimillion-pound bonuses whilst people this week had to queue up for bottled water in unbearable heat all because of a refusal to fix leaks. These are the very same execs who paid themselves massive salaries despite pumping poisonous sewage into our rivers.
“Ministers are just looking the other way whilst this scandal happens. You can’t trust this Conservative government to stand up for people and the environment. Instead, all they care about is keeping water company CEOs rich.”
The Environment Agency recently called for water company bosses to be jailed for serious pollution, after finding the water firms’ performance on pollution had declined to the worst seen in years.
A spokesperson for Water UK, which represents the water companies, said: “Private investment has brought more than £160bn into an industry that was previously starved of cash while improving water company efficiency by over 70%. That efficiency means costs are lower, allowing bills to remain around the same for over a decade in real terms while still allowing new investment in resilience projects and reduced leakage.
“Dividends in the last couple of years have averaged around 3%, in line with Ofwat’s expectations. Most companies last year either lost money or failed to achieve their base return allowed by the regulator.
“We are hugely ambitious about the further projects needed to protect against climate change. We have proposed major, cross-country schemes – including reservoirs and grid connections – that will deliver enough new water for ten million people. It is vital regulators now allow these schemes to proceed.”