In a press release that is receiving widespread coverage in this morning’s media, Tim Farron and Richard Foord attacked the huge bonuses received by water bosses while sewerage pours into our rivers and seas.
- Average water company executive pay and bonuses rose by a fifth compared to last year despite 2.7 million hours of sewage being pumped into rivers and swimming spots
- Average water company executives paid themselves £100,000 more in bonuses alone. Their average annual bonus now stands at over £600,000
- New Lib Dem figures revealed as hosepipe ban is announced for Thames Water who lose a quarter of all their water due due to leaking pipes going unfixed.
In the week that sewage flowed into Britain’s treasured seaside swimming spots, new analysis of water companies’ Annual Reports by the Liberal Democrats has found that executive pay packets have spiralled out of control.
Next week, millions of Thames Water customers will also suffer from a hosepipe ban despite the company leaking a quarter of all its water from leaking pipes. The firm failed to invest in fixing the leaks, but found over £3 million to pay their execs, an increase on last year’s executive payout.
Combined bonuses and salaries pay packets per water company executive rose by a fifth (21%) from 2020/2021 to 2021/2022. This is a year-on-year average rise per executive of nearly £200,000.
In the same year, bonuses alone rose by £100,000 per water company executive – marking a 18% year-on-year hike. The average water company exec annual bonus now stands at an eye-watering £670,000.
In total the twenty-two water bosses paid themselves £24.8 million, including £14.7 million in bonuses, benefits and incentives in 2021/2022.
Severn Trent Water paid out nearly £6 million in remuneration, including bonuses of £4.5 million, while United Utilities’ bosses saw a pay packet of £4.2 million, including £2.8 million in bonuses.
Sewage was released into the rivers and oceans along England’s entire southern coastline earlier this week, lighting up Surfers’ Against Sewage’s map with red crosses. In Cornwall, eleven beaches have been plagued with human waste and the water at five Devon beaches were marked as unsafe to swim in.
Liberal Democrat Environment spokesperson Tim Farron MP said:
This is a national scandal. These disgusting polluting habits have made beaches unsafe in the middle of the summer holidays and harmed precious British wildlife.
Hosepipe bans could have been avoided this summer if these water company CEOs bothered to invest in their rusting pipes rather than stuffing profits in their pockets.
They are putting profit over the environment. Frankly, the whole thing stinks.
Worst of all, Ministers are just letting them get away with it. The Government blocked a ban on sewage being pumped into our waterways and allowed creaking pipes to burst.
This Government is guilty by association for letting water companies get away with this.
Liberal Democrat MP for Tiverton and Honiton Richard Foord has seen beaches in his constituency marked as unsafe this week as a result of sewage discharges. Richard said:
It’s not enough to keep talking about what needs to be done; we need to see action so our children do not have to build sandcastles next to sewage.
Local people and holidaymakers shouldn’t be forced to swim amidst human waste. Devon’s beaches are amongst the best in the world but the Government is turning a blind eye while private companies ruin them.
Conservative MPs are taking the side of water companies by not challenging this mess. There is outrage here about the actions of these companies and those West Country MPs who voted to allow it should be ashamed.
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14 Comments
Messrs Farron and Foord are right to criticise privatisation greed. But it won’t be enough merely to criticise. There’s a danger Liberal Democrats will miss out if they don’t pay heed to the public mood 40 years after Thatcher’s privatisations.
In its largest ever poll on the topic, Survation has polled 4300 people on the question “do you think the following services should be run in the private sector or the public sector?”. A clear majority of people want water, energy, rail, buses, Royal Mail and the NHS to be run in the public sector.
Come on, Tim…… please don’t tiptoe round the edge of this.
@David Raw Not all of the water companies are private. Dwr Cymru (Welsh Water) which serves the North, West and far South of Wales was effectively renationalised over 20 years ago. It is now described as a social enterprise. Its executives have been paid the same eye watering sums as their colleagues in the private sector. Yet it still runs TV adverts under the tagline “Water for people not for profit”. I agree that public opinion has shifted away from privately run utilities. However it is too easy to say “public good, private bad.” There needs to be a serious debate about the role of the private sector in the regulated utility sector.
Gwyn Williams 19th Aug ’22 – 10:31am:
Dwr Cymru (Welsh Water) which serves the North, West and far South of Wales was effectively renationalised over 20 years ago. It is now described as a social enterprise.
Dŵr Cymru has a worse record for both number and duration of sewage spills than every one of the English water companies, including those serving over five times more customers…
‘Wales sewage dumping soars to 105,000 recorded incidents’ [March 2022]:
https://www.bbc.com/news/uk-wales-60738645
‘Raw sewage discharged into English rivers 375,000 times by water firms’ [March 2022]:
https://www.theguardian.com/environment/2022/mar/31/sewage-released-into-english-rivers-for-27m-hours-last-year-by-water-firms
David Raw focuses on an important perception amongst the general public. One can well understand this reaction which probably stems from a feeling that ‘surely anyone can do better than this!’
This highlights what may be a growing problem for many entities, be they public or private – an unwillingness to use discretion and common-sense lest any decision isn’t compliant with policy handed down from on high. People who challenge are all too often regarded as a problem rather than an asset. It has often become a cultural failing.
I can already also hear the excuses for continuing with the high rewards for the CEOs of newly nationalised entities. “We need to be able to offer competitive packages to the private sector”.
So changing ownership is unlikely to be the answer in itself. We need a style of management that is hugely more inclusive in terms of encouraging the workforce to engage with creating improvements and efficiencies within their companies..
I return to the cultural problem. Too many people are prepared to settle for a quiet life and don’t want to be seen ‘rocking the boat’. This often means that some middle/senior managers cruise through their careers without really managing anything other than repetitive day to day procedures. This approach is one of the things these highly paid people should be addressing – but I wonder whether many of them do. After all, you can bet that it’s the people at the coal-face who can tell you why things are going wrong!
“In 2001, Welsh Water became a not-for-profit organisation with no shareholders. This differentiates it from all the other Water companies operating in England and restores it to the same organisational status as water supply utilities in Scotland and the pre-privatisation water supply undertakings in England”
Comments on success/struggles of Dwr Cymru/Welsh Water probably leads us to the basic question:
i) do we want a water company struggling to protect citizens from worst of it’s product and have massive bonus payments to shareholders, or
ii) do we want a water company in same starting position but not paying massive bonusses to share holders?
The answer is obviously the third option , but I don’t know how to get there. It probably starts with a time machine and telling whoever came up with the suggestion “lets try to do public services as cheaply as possible, trusting the markets fully to look after us, and not invest to future proof,” that they’re getting it wrong. Twitter will tell you that means going back 40 years to Thatcher or going back 10 years to austerity so please take your pick.
George Thomas 19th Aug ’22 – 1:09pm:
Twitter will tell you that means going back 40 years to Thatcher or going back 10 years to austerity so please take your pick.
If I had access to this Twitter time machine I’d want to go back much further to the 19th. Century and explain to the Victorians that combining rainfall drainage with wastewater drainage was a seriously bad idea and that they should introduce a building regulation to stop such a practice…
‘1. Was your house or property built after the 1920s?’:
http://www.connectright.org.uk/misconnections/1-was-your-house-or-property-built-before-the-1920s
‘Combined Sewer Overflows Explained’:
https://environmentagency.blog.gov.uk/2020/07/02/combined-sewer-overflows-explained/
@ Gwyn Williams “North, West and far South of Wales was effectively renationalised over 20 years ago. It is now described as a social enterprise. Its executives have been paid the same eye watering sums as their colleagues in the private sector”.
Well of course they do, Gwyn,….. in order to recruit from the for-profit private sector. Taking all the rest of the water companies in the UK into public ownership could soon put a stop to that. “People before profits” ought to fit well with traditional Welsh radicalism.
The so called ‘agency problem’ is not unique to natural monopolies like water services. It is a problem that exists in many public companies and even with areas like local authority CEOs or University Chancellors. One of the key arguments for privitisation was under-investment while in public ownership.
The excessive executive remuneration feature of the agency problem was seen with banker bonuses in the financial crisis and a bankers bonus tax was introduced as a consequence.
Water is a natural resource and as such should be subject to Land Value Tax on excess returns. As Ofwat notes “Although the water and sewerage companies are largely monopoly service providers they must compete for capital with other companies. If they do not offer comparable returns to other companies, after taking into account relative risks, they will be unable to secure the capital they need to finance their investment programmes”.
While OfWatdoes not control profits they do set price controls “In setting price controls our aim is to allow for a return on capital that is no more than necessary for an efficiently run company to get the funding they need from capital markets”.
There are good arguments for having water companies run by municipal authorities, but only if they have authority to raise capital for infrastructure investment (including spare capacity for storm tanks to reduce sewage overflows) independent of central government imposed borrowing limits.
The privatisation had nothing to do with improvement for customers; it was based entirely on the flawed right wing dogma that ‘If it doesn’t make a profit it’s not working efficiently”.
Water, gas, rail, etc, under public ownership, all had the problem of accountability to the customer; Thatcher/Major sold them, at a loss, to a private sector that, because of the Tory hatred of ‘regulation’, had all the faults of public ownership with unregulated profit as the prime goal.
Offwat, OffGen, etc. are mouthpieces for the companies not the customer..The head of Offwat’s interview sounded exactly like that of the CEO of a water company with mealy mouthed excuses for failures and the need for profit, high salaries, etc.
Executives and Investors have milked the system since privatisation; they were bought at a loss to the public and should be brought back under public ownership with the ‘loss’ carried by the current owners.. When that happens the existing toothless ‘watchdogs’ should be replaced by something that, like Ronseal, “Does exactly what it says on the tin”.. If high salaries are required so be it but any bonus should be for ‘success not failure’ and the new watchdog execs, should be rewarded for holding the companies to that maxim..
Will it happen? Not a chance!
Larry the Cat has joined the campaign against sewerage dumping. I wonder if we can persuade him to join the Lib Dems.
https://twitter.com/Number10cat/status/1560647283103768577
It is established Lib Dem policy to promote a ‘public benefit company’ model for utilities, including water – see lines 131-134 of motion F11 of the Spring 2021 Conference (as printed in the conference agenda) and paragrpahs 3.3.9 – 3.3.11 of the Policy Paper 140 ‘Giving Consumers a Fairer Deal’. Perhaps recent events mean that this policy should be strengthened for the water utilities from ‘promote’ to ‘require’.
(for transparency, I was a member of this Policy Working Group).
All water companies should be banned from paying dividends to shareholders until they have fixed their leaks and stopped pumping sewage into pour waterways.
The UK Water industry is a mix of public and private entities UK water industry. Northern Ireland Water and Scottish Water are both publically owned companies. Welsh water is a private company limited by guarantee (similar to many Charities or public benefit companies) and does not have shareholders or pay dividends. Executives are well remunerated regardless Welsh Water bosses handed bonuses of £931,000. In England there is a mix of publically listed and private companies regulated by OfWat. In my area, Thames Water is a privately owned with investors including the Australian Bank Macquarie and the BT pension fund. Pension funds and investors need dividends or interest to service their pension payments or returns to savers/investors.
If capital is not raised via subscription for shares then it must be raised by bonds/loans and interest is paid instead of dividends. This can be quite high for shorter-term finance when inflation is high.
Whether water companies are privately or publically owned they still have to raise capital and make payments for the cost of that capital to shareholders or lenders. Public ownership does not make Water companies more efficient. Intelligent and informed regulation of the industry, whether in a public or private wrapper, can. The policy paper ‘Giving consumers a fairer deal’ can be found here. On public benefit companies the paper writes “Our reforms to regulation and price controls may not always be sufficient to ensure good outcomes for consumers, or to deliver public policy objectives such as addressing the climate emergency. We would promote a public benefit company model for electricity distribution, gas distribution and water companies, so that particular economic and environmental policy objectives, such as those discussed in this paper, must be considered explicitly in the running of the companies.”
The Conservatives like to make large sums of money at the cost to those who can afford it the least.
Surely there has to be some code of practice within this former public owned service.
For so long this situation of vast payouts has been ongoing, while other countries continue with public ownership.
With all the the time wasting by this government the interest of those who voted has been ignored. If we listed the failures where urgen change is needed, and had a more unified approach to improvement this could be one answer.
I listened today to the problems in France and nuclear power cooling, with the lack of water in outlets. The law was the warmed water was only to be released with lower temperatures. This has now been reversed.
I believe we need a long term approach to energy and production.