New law to ban bonuses for polluting water bosses
Source: gov.uk (2025-02-24)

The Water (Special Measures) Act 2025 has today received Royal Assent, boosting the powers of water sector regulators to tackle pollution.

Major legislation to crack down on water bosses polluting Britain’s rivers, lakes and seas has today been signed into law in the most significant increase to enforcement powers in a decade.

The Water (Special Measures) Act 2025 will give regulators new powers to take tougher and faster action to crack down on water companies damaging the environment and failing their customers.

The Act delivers on the manifesto pledges to clean up the water sector, including increasing the ability of the Environment Agency to bring forward criminal charges against water executives who break the law. It will create new tougher penalties, including possible imprisonment, for water executives who obstruct investigations.

The new legislation will provide powers for Ofwat to ban the payment of bonuses to water bosses if they fail to meet high standards to protect the environment, their consumers, and their company’s finances.

Other measures in the Act include automatic penalties to allow regulators to issue penalties more quickly, without having to direct resources to lengthy investigations. It will also introduce independent monitoring of every sewage outlet, with water companies required to publish real-time data for all emergency overflows. Discharges will have to be reported within an hour of the initial spill.

Environment Secretary Steve Reed said:

“We promised to put water companies under tough special measures to clean up our waterways. Today, the Government has delivered on that promise as we continue to deliver on our Plan for Change.

“Polluting water bosses will no longer be paid undeserved bonuses. And if they break the law over water pollution, they could end up in the dock and face prison time.

“This is just the beginning. The Independent Water Commission will report back later this year to shape new laws that will transform our water system so we can clean up our rivers, lakes, and seas for good.”

The Act introduces bold new measures to clean up the industry, including:

Enhanced enforcement powers: The Environment Agency will have increased ability to bring criminal charges against water bosses who break the law, who could face tougher penalties such as imprisonment of executives when companies fail to cooperate or obstruct investigations. The cost recovery powers of regulators will be expanded to ensure that water companies bear the cost of enforcement action taken in response to their failings.

Ban on bonuses: Ofwat will have the power to set rules prohibiting the payment of executive bonuses if companies fail to meet high standards in protecting the environment, their consumers, and financial resilience.

Automatic penalties: Automatic penalties will be introduced for a range of offences, allowing regulators to issue penalties more quickly without redirecting resources to lengthy investigations.

Independent monitoring: Every emergency sewage outlet will be monitored, with data independently scrutinised and made publicly available within an hour of sewage spills occurring. This will ensure transparency and direct further investment to improving sewage infrastructure.

Pollution Incident Reduction Plans (PIRPs): Water companies in England will be required to publish annual Pollution Incident Reduction Plans and report regularly on their progress, enabling the public and regulators to hold companies accountable for reducing pollution incidents.

The Act marks a major milestone in the government’s long-term approach to tackling the systemic issues in the water sector – helping to meet the challenges of the future, such as climate change, and driving economic growth.

Further legislation aimed at fundamentally transforming how our entire water system operates will be guided by the findings of the Independent Water Commission, led by Sir Jon Cunliffe, which is currently conducting the largest review of the industry since privatisation.

Action taken so far

Immediate steps:

In his first week, the Secretary of State for Environment Food and Rural Affairs Steve Reed announced a series of initial steps (https://eur03.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.gov.uk%2Fgovernment%2Fnews%2Fgovernment-announces-first-steps-to-reform-water-sector&data=05%7C02%7CHolly.Cormack%40defra.gov.uk%7C84f0bb34e54240913bb408dd51d33443%7C770a245002274c6290c74e38537f1102%7C0%7C0%7C638756689805716944%7CUnknown%7CTWFpbGZsb3d8eyJFbXB0eU1hcGkiOnRydWUsIlYiOiIwLjAuMDAwMCIsIlAiOiJXaW4zMiIsIkFOIjoiTWFpbCIsIldUIjoyfQ%3D%3D%7C0%7C%7C%7C&sdata=2Hmifnh%2BDewCfmqfudaPmy2zJ9InH3F1aj5Gx0iE1AU%3D&reserved=0) towards ending the crisis in the water sector:

After writing to Ofwat, the Secretary of State secured agreement that funding for vital infrastructure investment is ringfenced and can only be spent on upgrades benefiting customers and the environment not diverted for bonuses, dividends or salary increases.

Water companies will place customers and the environment at the heart of their objectives. Companies have agreed to change their ‘Articles of Association’ – the rules governing each company – to make the interests of customers and the environment a primary objective.

Consumers will gain new powers to hold water company bosses to account through powerful new customer panels. For the first time in history, customers will have the power to summon board members and hold water executives to account.

Strengthen protection and compensation for households and businesses when their basic water services are affected. We have now doubled the compensation customers are legally entitled to when key standards are not met. The payments will also be triggered by a wider set of circumstances including Boil Water Notices.

Independent Commission:

We have launched an Independent Commission (https://eur03.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.gov.uk%2Fgovernment%2Fnews%2Fgovernments-launch-largest-review-of-sector-since-privatisation&data=05%7C02%7CHolly.Cormack%40defra.gov.uk%7C84f0bb34e54240913bb408dd51d33443%7C770a245002274c6290c74e38537f1102%7C0%7C0%7C638756689805740456%7CUnknown%7CTWFpbGZsb3d8eyJFbXB0eU1hcGkiOnRydWUsIlYiOiIwLjAuMDAwMCIsIlAiOiJXaW4zMiIsIkFOIjoiTWFpbCIsIldUIjoyfQ%3D%3D%7C0%7C%7C%7C&sdata=pxrhBpE3a3y4z3SNIj3ragEbkFd3VJwzy92rUDLwNIQ%3D&reserved=0) into the water sector and its regulation, in what is expected to form the largest review of the industry since privatisation.

Former Deputy Governor of the Bank of England, Jon Cunliffe, has been appointed as the chair of the Commission. With several decades of economic and regulatory experience, his appointment demonstrates the Government’s serious ambitions. The Commission will draw upon a panel of experts from across the regulatory, environment, health, engineering, customer, investor, and economic sectors.

A set of recommendations will be delivered to the Defra Secretary of State, and Deputy First Minister and Cabinet Secretary for Climate Change and Rural Affairs.

These recommendations will form the basis of further legislation to attract long-term investment and clean up our waters for good – injecting billions of pounds into the economy, speeding up delivery on infrastructure to support house building and addressing water scarcity, given the country needs to source an additional 5 billion litres of water a day by 2050.

Further information:

Please see further details on the Water (Special Measures) Act here (https://www.gov.uk/government/publications/water-special-measures-bill-policy-statement/water-special-measures-bill-policy-statement).

Stakeholder quotes:

Alan Lovell, Chair of the Environment Agency, said:

“The passing into law of the Water (Special Measures) Act is a crucial step in making sure water companies take full responsibility for their impact on the environment.

“The increased regulatory powers introduced by this legislation will allow us to close the justice gap, deliver swifter enforcement action and ultimately deter illegal activity.

“Alongside these reforms, we are undertaking the biggest ever transformation to the way we regulate. By investing in additional resources, training and updated digital assets, we are ensuring the water system better meets the needs of both people and the environment, now and in the future.”

Huw Irranca-Davies, Wales’s Deputy First Minister for Wales with responsibility for Climate Change, said:

“Restoring our rivers and improving water quality is a key priority for us.

“We’ve been working in partnership with the UK Government to tackle pollution in our rivers, lakes, and seas, and to make sure the water industry is properly regulated.

“Today’s Royal Assent of the Special Measures Bill is another step forward and shows what we can achieve working together.”

Helen Campbell, Ofwat’s Senior Director for Sector Performance, said:

'’We welcome today’s Royal Assent of the Water (Special Measures) Act 2025, which provides a clear signal to create a water sector that delivers for all customers and the environment.

“The Act gives Ofwat new powers to set requirements for companies on remuneration and governance, including prohibiting performance-related executive pay. These rules are an important step towards rebuilding public trust within the water sector, while also prompting water companies to focus on delivering a change in their culture that better meets the expectations of their customers.

“We are working at pace to implement these new rules and intend to launch consultations on the final proposals later this year.”

Mike Keil, Chief Executive of the Consumer Council for Water (CCW), said:

“Repairing people’s fractured trust in the water sector requires not only a vast improvement in environmental performance, but also a sea change in water company culture so customers’ priorities are put before profit.

“It will take time to transform the water sector, but these new legal powers mark an important step in tackling two issues which make people’s blood boil – water company executives being rewarded for failure and pollution in our rivers, lakes, and seas.

“Water companies will be placing much bigger demands on billpayers’ finances over the next five years, so people have a right to expect far more for their money.”

Mark Lloyd, Rivers Trust CEO, said:

“The Water Special Measures Bill is a welcome first step from the government towards building a water system which restores nature, builds resilience to drought and flooding, and tackles the widespread issues of pollution.

“We welcome the improvements made to the bill in its passage through the Lords and the Government’s acceptance of amendments strengthening the environment duty of Ofwat and a greater emphasis on Nature Based Solutions.

“We are engaging closely with the current Independent Water Commission which we see as a once in a generation opportunity to take several more, and bolder steps towards a more integrated and catchment-based approach to managing water.”

Richard Benwell, CEO of Wildlife and Countryside Link, said:

“We welcome Royal Assent of the Water (Special Measures) Act 2025, an important step toward cleaning up the freshwater environment. Regulators must make decisive use of new enforcement powers wherever companies continue to pollute, and Ofwat should make the most of new financial disclosure rules to ensure that funds that ought to be spent cleaning up rivers are never again siphoned off for profit.

“As the Government has recognised, the Act is just a first step. It must be followed promptly by further legislation and action to clamp down on pollution and ramp up environmental investment across whole catchments and across all the sectors responsible for polluting our rivers.”

Ali Morse, Water Policy Manager at the Wildlife Trusts, said:

“It’s encouraging to see The Water (Special Measures) Act bringing welcome powers and resourcing for regulators, as well as protections for the environment, with additional sewage spill monitoring and a focus on reducing pollution. These are topics that customers really care about. It lays important groundwork for the future legislative changes which are vital to ensure that the water sector can achieve what it needs to in the interests of its customers, and the rivers, lakes, and seas which people cherish.

“The work of the Independent Water Commission offers a once in a generation opportunity to reshape the way that we secure the improvements our waters desperately need, across catchment and sectors, and we’ll continue to work with the Commission and Government to ensure that these vital changes are driven forward.”

Jamie Cook, Angling Trust CEO, said:

“We welcome the government’s early action on water pollution with this bill. The behaviour of water companies is a national scandal, and illegal sewage pollution must result in prosecutions.

“The Angling Trust’s network of water-testing volunteers regularly exposes horrendous pollution in waterways and damage done to fisheries. The Environment Agency must use its powers to prosecute any law-breaking water bosses and address any illegal sewage spills uncovered in its long-standing investigation into potential permit breaches.

“This bill is a first step toward cleaning up waterways and fixing the regulatory system. The Independent Water Commission must now drive systemic reform, leading to a stronger water bill later in this Parliament—one that transforms water management and safeguards rivers, lakes, seas, and the fish that depend on them.”

Ben Seal, Head of Access and Environment at Paddle UK, said:

“Paddle UK and The Clean Water Sports Alliance welcomes the Water (Special Measures) Act receiving Royal Assent today. This legislation is a shot across the bows of polluting companies. Banning bonuses for failures and issuing tougher penalties is a very welcome first step by the Government - a down payment on the promised future reform that our broken system so desperately needs”

“Enjoying time in, on, or alongside water is vitally important in supporting the health and wellbeing of millions of people. Our community has campaigned tirelessly to raise awareness of the impact pollution is having on both people and nature. We will be watching closely to ensure that these new powers are used to their fullest, to hold polluters to account and begin to restore our precious blue spaces”.