Despite the noise around England’s sewage scandal, the political response so far has mostly generated headlines, not real consequences. Ministers performatively “rage” about polluting water companies. Regulators are rejigged. Laws are passed. Yet little actually changes. The latest manoeuvre by Yorkshire Water is a case in point – and a revealing one.
In March, the company was ordered to pay £40m for the “unacceptable impact” of sewage spills blamed on poor maintenance. It was one of six firms caught by Labour’s new bonus ban for the most serious polluters, passed under the Water (Special Measures) Act earlier this year. But the company confirmed to the Guardian that its chief executive, Nicola Shaw, received an additional £660,000 for “investor-related” work last year – on top of her £689,000 take home pay.
The money did not come from Yorkshire Water directly, but from Kelda Holdings, the firm’s offshore parent. Using complex corporate structures to sidestep regulatory scrutiny is not a new trick. Many water companies are structured to allow financial engineering to take place at one remove from the regulated business. But Yorkshire’s executive reward scheme reveals something important about the nature of the bonus ban itself: its design left scope for avoidance. If companies can reclassify pay or shift it between entities, enforcement becomes a matter of interpretation.
Ministers say they are “aware” of the payments and Ofwat is “assessing” them. But this is a now-familiar Whitehall formulation – passive, conditional and hollow. The environment secretary, Steve Reed, appears to have a habit of making threats he doesn’t back up. When Southern Water, also under the bonus ban, nearly doubled the pay package awarded to its CEO to £1.4m, Mr Reed’s response was to urge him to turn it down. No ministerial direction to investigate. No legal challenge or legislative amendment. Just a suggestion.
Why the timidity? Because Labour’s tough talk on water is just words. It won’t touch the system that enables this behaviour, and ministers bend over backwards to reassure markets they never will. The Treasury wants Thames Water kept private – warning Mr Reed a £4bn rescue through nationalisation would gut his entire budget. No wonder he keeps shroud-waving about the cost of public ownership
The government seems dazzled by private providers. Regulators are being asked to offer “forbearance”, as Mr Reed’s Independent Water Commission suggested. No doubt they had in mind Thames Water, which is facing an estimated £1bn in Ofwat performance penalties. The logic seems to be that enforcement risks spooking the investors needed to fund long-overdue infrastructure upgrades.
But this reveals the real problem. England’s water system has been financialised to the point of dysfunction. Layered holding companies, offshore entities and opaque capital structures mean regulators are chasing shadows. Attempts to govern via gesture – bonus bans, naming and shaming – are no substitute for structural reform.
Most countries retain public ownership, recognising water as a public good, not a commodity. The idea that better people could fix the system is a fantasy – decades of extraction, debt-loading and dividend grabs show the model itself is broken. If Labour truly wants to clean up the nation’s waterways, it must confront a hard truth: the incentives of private capital and the obligations of public interest, health and accountability do not align. Until then, expect more sewage, more euphemisms and more payments that defy the spirit – if not always the letter – of the law.
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