Ministers have vowed that new laws will mean there will be no “outrageous” Southern Water-style pay rises for water executives in the future.
Lawrence Gosden, who has led Southern Water since 2022, was awarded £691,000 as part of a long-term incentive plan this year on top of his fixed pay of £687,000, according to the company’s annual report.
It brought his total earnings to more than £1 million.
But Whitehall sources told The i Paper that the uplift in pay was awarded under the previous Conservative Government and that new rules within the Water (Special Measures) Act had now outlawed such payments.
The payment to Mr Gosden was awarded in 2023/24 but has only been published in the latest accounts for Southern. The new laws cover any payments from 2024/25.
It means any other water company planning to award their executives with similar long-term investment plans will be prevented from doing so.
Lawrence Godsen, chief executive of Southern Water (Photo: Southern Water/Facebook)Environment Secretary Steve Reed branded the size of the incentive payment as “outrageous”, coming at a time when sewage discharges had increased by 60 per cent in the last year.
Reed said that he would look at closing potential loopholes that would allow failing water companies to get around the ban on bonuses, but has stopped short of setting out how private companies should award salaries.
Speaking to The News Agents podcast, the Cabinet minister said that the Government had prevented Thames Water from attempting to make new bonus payments but under a different name.
Asked whether the bonus ban will make any difference if water firms begin paying their executives higher salaries, Reed said: “Companies need to act responsibly, and they need to have a thought to what their customers might think.
“When you’ve got companies that are putting up their water bills by in excess of 26 per cent in some cases and then thinking it’s acceptable to give their bosses a significant pay rise, that’s out of order.”
Southern Water was banned from paying bonuses last month over a so-called “category 1” sewage spill in the New Forest, Hampshire, in August 2024.
Under new rules, companies are banned from paying bonuses if they do not meet environmental, consumer, or financial standards, or are convicted of a criminal offence.
Southern Water has insisted the payment to Mr Gosden is not a bonus but part of a long-term incentive plan set up in 2023 and linked to a two-year effort to improve the company’s performance.
It is also paid directly by shareholders rather than out of consumers’ bills.
A Southern Water spokesperson said its chief executive’s pay and benefits were decided by a remuneration committee “following protocols and rules set out by Ofwat and in accordance with the law”.
They added: “Lawrence Gosden’s 2025 package includes a relocation allowance and long-term incentive plan paid by shareholders, which marks improvements made during the delivery of our turnaround plan. Both of these payments represent common industry practice.”
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