MPs argue that bonuses and dividends for executives and shareholders of water companies should receive prior approval from the regulator, as public funds are being used irresponsibly according to a report by the Environment, Food, and Rural Affairs (Efra) select committee.
The report also proposes that the government consider moving away from the profit-driven water company model and adopting a non-profit approach, similar to the model used in Wales.
Welsh Water is noted for having lower debt levels and financial resilience compared to many water companies in England, which have been negatively affected by dividends and private ownership.
Thames Water executives were recently exposed for receiving bonuses worth millions of pounds from a problematic £3 billion loan meant to stabilize the company’s finances.
The government has established an independent water commission to explore the future of England’s privatized water industry, which has been criticized for sewage spills, financial mismanagement, executive bonuses, and potential taxpayer bailouts.
The committee’s report aims to inform the commission after gathering extensive evidence from industry experts.
Key recommendations include giving the regulator Ofwat the power to prevent unsuitable owners from acquiring water companies and to object to the appointment of executives.
Despite recent legislation allowing the government to ban executive bonuses, the report notes that loopholes exist and that bonuses can be disguised as other forms of payment.
Lib Dem MP Alistair Carmichael, the chair of the Efra committee, emphasized the public’s growing discontent with water companies, drawing attention to the excessive dividends and bonuses paid out despite poor performance.
He criticized the opaque financial structures of water companies and stressed that their primary aim should be delivering a quality service to customers rather than managing finances and debt levels.
