Water Special Measures Bill: Prison Risk and Bonus Bans for Water Bosses

In a speech the following day, the Environment Secretary described the Bill as a first step and confirmed that a full review of the water system would shape further legislation, with details to follow in the autumn.

What the Bill would do

• Criminal liability: it makes it easier for the Environment Agency to bring criminal charges against law-breaking water executives, and introduces imprisonment for obstructing Environment Agency and Drinking Water Inspectorate investigations, with offences triable in both the Crown Court and magistrates' courts. Previously, the maximum punishment for most obstruction cases was a fine.
• Bonus bans: Ofwat will be able to ban performance-related pay, including bonuses, for chief executives and senior leaders unless companies meet high standards on the environment, consumers, financial resilience and criminal liability. Ofwat will also set fitness and propriety rules for directors.
• Automatic penalties: the Environment Agency will be able to impose fixed monetary penalties as automatic penalties for specified offences on the civil standard of proof, rather than proving minor offences beyond reasonable doubt. The current maximum fixed penalty is £300; the offences and new amounts will be set in secondary legislation after consultation.
• Monitoring: companies must publish real-time data, within an hour, for all emergency overflows in England, and publish annual Pollution Incident Reduction Plans.

Who is affected

The Water Special Measures Bill is aimed squarely at water and sewerage undertakers and their boards. Directors and senior managers face a new personal risk profile, combining possible imprisonment for obstruction with restrictions on remuneration. Investors and lenders will want to understand how bonus restrictions, fitness and propriety rules and expanded cost recovery powers, under which companies bear the cost of enforcement action, affect governance and returns.

What happens next

The Bill now begins its parliamentary passage. Much of the detail, including the list of offences subject to automatic penalties and their value, will follow in secondary legislation, and the Environment Agency will consult on its expanded cost recovery powers.

Sources

• GOV.UK: Landmark legislation to crack down on bosses for polluting water
• GOV.UK: Steve Reed speech on the Water (Special Measures) Bill