Water bosses must not dodge the bonus ban by disguising bonuses as other pay, Environment Secretary Dame Angela Eagle said on Thursday as a review began.
Eagle has asked for the review of the bonus ban rule to be wide-ranging, as she moves to close loopholes that reward failure in the water industry.
She said the review would ensure “failure doesn’t pay, whatever name the payment goes by”, and added that the ban was the first step and that where loopholes exist she wants them closed.
The Department for Environment, Food and Rural Affairs said the ban has stopped more than £10 million going to water bosses since it was introduced.
Nine water companies triggered the ban in the last financial year alone, and more than £6.5 million of potential bonuses were blocked.
Even so, some executives saw their total pay rise over 2025-26 despite continued poor performance, the department said.
Ofwat has warned that retention payments and large, unexplained increases in base pay risk undermining the spirit of the bonus ban and eroding public trust.
The review follows the first joint report from the water regulators, which pools their data so that a company cannot point to a good score from one regulator while falling short with another.
It was published alongside the Environment Agency’s Environmental Performance Assessment Report, which found pollution incidents remain far too high, with only one company achieving the top four-star rating.
One-star ratings automatically block bonuses for executives at Southern Water, Thames Water, South West Water and Yorkshire Water.
The same applies to any company with a Category 1 pollution incident, defined as one with a major, serious, persistent or extensive impact on the environment, people or property.
Eagle said: “People are sick of seeing water bosses profit while rivers are polluted and customers are repeatedly let down.”
The Environment Secretary will also set out improvement actions for each water company, covering leakage, sustained reductions in pollution incidents and customer satisfaction.
Members of the public can respond to Ofwat’s four-week call for evidence, which closes on 10 December.
Its findings will inform the government’s work to strengthen accountability in the water sector, including through the strengthened Water Bill.
The department described the steps as part of a plan to put the public back in control of water.
It said Eagle has already set expectations for the next Price Review, warning companies they must deliver better value for money for struggling households.
Eight new regional water councils are also planned to give local people a say.