It’s time Ofwat hit the polluters where it hurts – in their bonuses
Ofwat, the water regulator, has noticed that the industry it oversees in England and Wales has been in the news recently. So it has been. Discharges of raw sewage into rivers and coastal waters is a scandal happening in plain sight, and each set of data feels more shocking than the last. A highly critical report from MPs on the environmental audit committee in January made a strong case that Ofwat itself, plus the Environment Agency, should be more assertive.
And here comes a regulatory response of a sort to the “current high level of scrutiny” of the sector: a letter from David Black, Ofwat’s interim chief executive, to the chairs of remuneration committees of the water firms suggesting, in a roundabout way, that bosses’ bonuses should be cut if the pollution record is poor.
The letter is the first of its kind and acts on one of the MPs’ suggestions, but one cannot call it strongly worded. Performance-related pay should show “a substantial link” to delivery for customers, including on “environmental commitments and obligations”, wrote Black, which is hardly laying down the law. There was a reminder to boards that they are allowed recognise shortfalls “whatever the initial framework for [pay] incentives”, which is just a statement of something the directors should know already: bonuses are always discretionary.
One could say, generously, that Ofwat is merely at the preliminary stage of issuing a high-level warning and that tougher tactics could follow. The problem with that interpretation, though, is that Black didn’t specify what penalties would be imposed if his appeal for good behaviour on pay and bonuses is ignored, which must be a possibility.
In recent press interviews, he has hinted at fines or changes to licence
Read more on theguardian.com
