Water companies have been found to be circumventing bonus rules, despite the government's efforts to clamp down on excessive executive pay. The Labour government's Water (Special Measures) Act of 2025 aimed to ban performance-related bonuses for polluting water bosses, but it was flawed. The regulator, Ofwat, was given limited powers, allowing water companies to increase overall pay through salary increases, allowance awards, and retention payments. This has resulted in a 1.5% rise in reported pay packets for chief executives and chief financial officers, with Thames Water's CFO receiving a delayed signing fee and the company entering into agreements to resolve potential claims. The government's response is predictable, as they should have anticipated such behavior. The issue lies in the government's reliance on remuneration committees to follow the 'spirit' of their reforms, which is naive. Restricting bonuses doesn't equate to restricting overall pay, and Ofwat's powers are limited. The regulator's review in the autumn may yield changes, but past experience suggests a cautious approach. This situation highlights the need for a more comprehensive approach to regulating executive pay in monopolies.
