Water companies have found creative ways to circumvent bonus rules, despite the government's efforts to regulate their pay structures. The Labour government's Water (Special Measures) Act of 2025 aimed to ban performance-related bonuses for polluting water bosses, but it fell short. The regulator, Ofwat, was given limited powers to block performance-related bonuses for the worst offenders, but it couldn't formally address other payments. As a result, water companies have increased salary increases, allowance awards, and retention payments, leading to a 1.5% rise in overall reported pay packets for chief executives and chief financial officers. This trend is particularly evident at Thames Water, where the chief financial officer received a delayed £1 million signing fee, and retention payments for other executives were 'paused' but now appear to be back on the table. The government's response is predictable, but it's naive to expect a ban on bonuses to solve the issue. Water companies have used retention manoeuvres in less-than-transparent ways, and the government's reliance on remuneration committees to follow the 'spirit' of their reforms is questionable. The regulator's review in the autumn may yield changes, but past experience suggests that the government's promises of 'greater public control' should be taken with a grain of salt.
