Water (Special Measures) Act 2025: Enforcement

Josh Newbury Excerpts

Tuesday 20th January 2026 Westminster Hall

[Tom Gordon]

I thank my hon. Friend for her intervention. I do not envy her having to battle just one water company, but two. She has her work cut out for her—some of us are now breathing a sigh of relief in comparison. The problem is, as she outlined, that there is no accountability. It often takes public pressure, campaigning or us in this place banging the drum to talk about these issues to get those meetings set up and problems fixed when it is a basic obligation that water companies should already provide.

Since the introduction of the 2025 Act, we have seen issues across the country. The failure of water companies is a source of frustration and distrust in politics. People feel that the legislation that was passed is simply not working, or that we got it wrong. One of the most high-profile elements of the Water (Special Measures) Act was the commitment to block bonuses for executives at failing water companies. Water companies are upping their game and thinking about the way that they structure their payments to try and circumvent these measures and the bonus ban. Ofwat investigated Yorkshire Water last year, but said that it did not breach the legislation or regulatory guidance on executive pay. The payments made to the chief executive of Yorkshire Water, Nicola Shaw, through the offshore parent company Kelda Holdings were what they called “fixed fees” for group-level responsibilities and funded by shareholders. While technically that might not constitute a breach of the ban, it is a demonstration of how open to exploitation the system and the legislation are. Rather than a bonus ban, we have ended up with a bonus rebrand.

[Josh Newbury (Cannock Chase) (Lab)]

The hon. Gentleman is making a powerful speech on behalf of his constituents. Last year, it emerged that Thames Water was planning an enormous additional compensation package under the guise of a management retention plan. After being grilled by those of us on the Environment, Food and Rural Affairs Committee, and an understandable public outcry, it announced that it would no longer go ahead with that. Does the hon. Gentleman agree that any water company setting its moral bar lower than Thames Water should take a long, hard look in the mirror?

[Tom Gordon]

I completely agree with the hon. Member. I thank him and the Chair of the EFRA Committee, my right hon. Friend the Member for Orkney and Shetland (Mr Carmichael), who is also here today. The work that they have been doing in highlighting the issues endemic to water companies across this country could not have come sooner. The fixes that they have highlighted in their reports are important for driving this conversation as we look towards the future.

Turning back to Yorkshire Water, in the past two years, those payments—which were apparently not bonuses but rather “fixed fees”, or whatever Yorkshire Water called them—totalled more than £1 million, on top of the near £700,000 annual basic salary, at a time when pollution incidents were rising and trust was collapsing. Yorkshire Water’s chief executive has since said that it was a “mistake” not to disclose those payments and not to have been more transparent. Well, that is too little too late when Yorkshire Water has been caught with its hand in the cookie jar. My message to Yorkshire Water is simple: it can rename a bonus to a “fixed fee” and apologise for getting caught out, but the stench of sewage still clings to it, and to the bosses at Yorkshire Water.

I remain concerned about the overreliance on fines as a primary enforcement tool. In recent years, we have seen Yorkshire Water and many other companies facing record-breaking fines, but the problem remains: the lack of accountability that they face, even when such astronomical penalties are imposed on them. Simply put, we cannot fine our way out of failure when customers end up footing the bill.

--- Later in debate ---

[Josh Newbury (Cannock Chase) (Lab)]

It is a pleasure to speak with you in the Chair, Dr Allin-Khan. I pay tribute to the hon. Member for Harrogate and Knaresborough (Tom Gordon) for securing this debate and giving those in positions of power in our water industry a chance to hear hard truths and take accountability. Although the state of the industry and the morally questionable behaviour of many companies is a talking point for some, I know that he has been a dogged campaigner on this for many years. In fact, I am sure I saw a photo somewhere of him wading in the River Nidd, such is his commitment to getting up close and personal with the issues.

Speaking of getting up close and personal, those of us who are members of the Environment, Food and Rural Affairs Committee have had—I hesitate to say the pleasure—the task of grilling the bosses of nine water companies as part of our inquiry into reforming the water sector. We have dived into many of the issues that we are hearing about, such as sewage overflows, compliance with environmental laws, support for vulnerable customers, the impact of flooding and outages, and, of course, the atrocious corporate culture and disconnection from the principles of delivering an essential public service that has taken hold in much of the water industry. That work has reinforced for me just how bad things have got, how far public confidence in the water industry has been damaged and how necessary robust reform has become.

What I have heard from my constituents is echoed across the country: a sense that accountability is an afterthought, that communities are left to pick up the pieces when things go wrong, and that bosses can get additional compensation regardless of how their company performs. That is precisely why the Water (Special Measures) Act is so important. It rightly strengthens the powers available to regulators and makes it clear that persistent failure—environmental, operational or corporate—must carry real consequences. It reflects a clear Labour principle that essential public services must work in the public interest and not simply for shareholder return.

Crucially, the Act marks a decisive shift away from the regulatory complacency of the past. In the year from July 2024, criminal prosecutions of water companies rose by 145%—a clear sign of meaningful progress. However, enforcement needs to be felt not just at operational level, but at the top. It is impossible to justify the need for customers to tolerate sewage in our waterways, botched responses during outages and poor communication, while senior executives still receive substantial payouts with impunity. That disconnect is corrosive. It undermines confidence not only in individual companies, but in the whole system, regulators included. That is why I believe that the true test of the Act and the newly released water White Paper will be whether they drive a genuine shift in the industry—one in which transparency and consumer trust are central to how success is measured.

Some companies, as we have heard, have sought to repackage rewards under labels such as “retention payments”. The public do not distinguish between a bonus and a retention payment. They see only failing senior execs continuing to be rewarded. The boss of South East Water is set to receive a £400k bonus just for staying in his job, despite, as we have heard, the company leaving thousands of households in Kent and Sussex without water for days and issuing some of the worst crisis communications I have ever seen. Last month, the BBC picked up on the comment I made on social media that David Hinton should do his job or go. Having heard him in front of the EFRA Committee, I absolutely stand by that.

Ofwat is currently responsible for enforcing the Act. Enforcement has often been too slow and remote from customers’ lives, and that cannot be separated from how the regulator has operated. The Committee took a long, hard look at Ofwat and found a regulator that was too cosy in dealing with water companies and too bureaucratic in dealing with customers. A regulator that is slow to act, overly procedural and reluctant to challenge company behaviour will never deliver the cultural change that the Government are determined to secure.

It is important to recognise that not all regulators have failed. During a recent Committee session with South East Water and the drinking water inspectorate, the response from the DWI was, as the Chair of the Committee has said, incredibly useful. It was clear that it is doing very effective work, despite having fewer than 60 staff. As we move towards a new single regulator, we have to preserve the DWI’s culture, expertise and robustness. I hope that, in responding to the debate, the Minister can set out what the Department will do to make sure that the few examples of where the current regulatory system is working well are preserved rather than thrown out with the bathwater.

I welcome the measures set out in the new water White Paper, such as an end to companies marking their own homework. An MOT-style regime for water assets will finally move us from crisis response to prevention. The new water ombudsman, with its legally binding powers, will be customers’ advocate when things go wrong. Our communities want action. They want to know that when rules are broken, consequences will follow. The only way to change behaviour in a broken system is to change the law, and I am confident that we will continue to see tough action from this Government where the last failed so miserably.