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Invest revenue from water company fines into restoring our waters and ensure executive pay is linked to environmental performance

Key recommendations: 

  • Confirm the thousandfold increase in the cap on civil fines

  • Reallocate water company fines for investment in local river restoration

  • Instruct Ofwat to ensure that executive pay and rewards and shareholder dividends are commensurate to environmental performance 

The latest Environmental Performance report shows pollution by the water industry has got worse. Significant penalties have already been charged against water companies breaching their permits. Since 2015, the Environment Agency’s (EA) criminal prosecutions have secured over £130 million in fines, and in 2021 Southern Water was handed a record £90 million fine after pleading guilty to thousands of illegal discharges of sewage which polluted rivers and coastal waters in Kent, Hampshire and Sussex. 

This record-breaking fine was previously only possible in criminal cases, with civil sanctions capped at £250,000. This has been an insufficient deterrent and risked being interpreted as just another cost of doing business. The EA has only raised over £11 million from civil sanctions. That’s why we welcome the government's decision to increase the cap on civil fines a thousandfold, from £250,000 to £250 million. 

This increase helps to ensure the fines are proportionate to the environmental and economic harm that the pollution causes. Sewage spills from storm overflows and sewage treatment works have harmed the fishing industry as well as local retail and hospitality businesses reliant on visitors and tourists. This is an unacceptable economic risk to our coastal communities. 

To ensure that the polluter pays for the pollution they cause, the revenue generated from water company fines should be reallocated to a new government fund or a trusted third party, such as the National Lottery Heritage Fund, rather than being absorbed into the Treasury’s consolidated fund. The money should be made available for communities, organisations, and farmers in the same catchment as the pollution incident to apply for, for projects seeking to restore local waterways. If this revenue had been reserved for restoring our waters it would have provided over £140 million of investment in local initiatives tackling pollution between 2015 and 2021. These civil society groups - or ‘little platoons’ as Edmund Burke called them - are the best environmental stewards. This policy would give them the funding they need to safeguard our shared natural inheritance.

To hold water company executives to account, we also want Ofwat, the water regulator, to ensure both shareholder dividends and executive bonuses are linked to environmental performance. Rewards should not be paid out if a water company is not compliant with its environmental obligations and permits. Greater accountability through proportionate fines and executive pay will drive change in water company behaviour for the better.

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