Environment Secretary slams 'outrageous' bonuses for water bosses but fails to rule out legislating against pay rises

Steeve Reed told LBC's Lewis Goodall on Sunday morning: "I think it's absolutely outrageous.

"We passed legislation this year that bans those multi-million pound bonuses and indeed the regulator then used that legislation.

"But I would say to people like the boss at Southern (Water), they really need to think how this is going to look to their customers when they failed to deliver the investment plan that they had committed to in previous rounds of investment programming.

"Trust levels between customers and their water companies in many parts of the country are at an all time slow. Taking steps like that is only going to make this worse. And I think they need to think again".

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While Mr Reed stopped short of pledging new legislation to curb such payouts, he made it clear the current system is out of touch with public expectations.

"I don't think it's right for government to intervene in the salaries that private sector companies pay," he said.

"Most people understand a bonus is something that is given to you for doing well. And in this case, water companies paying themselves bonuses are doing very, very badly.

"I think that pay increase is outrageous and I think that they should think again about it."

Under new rules, companies are banned from paying bonuses if they do not meet environmental, consumer or financial standards, or are convicted of a criminal offence.

Earlier, on BBC's Sunday With Laura Kuenssberg the Environment Secretary has urged Southern Water's chief executive to turn down a pay rise worth hundreds of thousands of pounds, saying it was not "merited".

Lawrence Gosden, who has led Southern Water since 2022, was awarded £691,000 as part of a long-term incentive plan this year on top of his fixed pay of £687,000, according to the company's annual report.

It is understood that he has only received half of this payment this year, taking his total pay to more than £1 million.

Southern Water has insisted the payment to Mr Gosden is not a bonus but part of a long-term incentive plan set up in 2023 and linked to a two-year effort to improve the company's performance.

It is also paid directly by shareholders rather than out of consumers' bills.

A Southern Water spokesperson said its chief executive's pay and benefits were decided by a remuneration committee "following protocols and rules set out by Ofwat and in accordance with the law".

They added: "Lawrence Gosden's 2025 package includes a relocation allowance, and long-term incentive plan paid by shareholders which marks improvements made during the delivery of our turnaround plan. Both of these payments represent common industry practice."

Mr Reed's criticism of Mr Gosden's pay package came before the publication of a landmark review of the water industry, which is expected to recommend sweeping reforms to how the sector is regulated, including the abolition of regulator Ofwat.

The review follows widespread criticism of water companies for awarding executives large bonuses and paying significant dividends to shareholders while missing targets for investing in infrastructure and overseeing a rise in sewage pollution in England's rivers.

Earlier this month, Southern Water itself was forced to ask its owner, Australian investment firm Macquarie, for an extra £2.1 billion to help boost its struggling finances.

The company, which supplies 4.7 million people across the south and south-east of England, has amassed nearly £9 billion of debt - making it one of the most heavily indebted water firms in the UK behind Thames Water, previously also owned by Macquarie.