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Thames Water has threatened to raise its executives’ base salaries if the UK government continues plans to restrict bonuses for water bosses.

The utility, which plans to raising fees by at least a third for the 16mn customers it serves in and around London, has warned the water regulator of its plans to raise base pay, according to a report by the company’s board’s regulatory strategy committee of Thames Water.

“We have made it very clear to Ofwat that, if it goes ahead with its proposals, it is likely that base pay will need to be increased to compensate for the loss of performance-related pay plans,” reads the report dated December 3 of Jon Haskins, chief risk and compliance officer at Thames Water.

“We also highlight the impact of the proposals on attracting, retaining and motivating the necessary talent across the sector, and its importance for attracting investment,” the report added.

The plan to clamp wages and bonuses for poor performance of water companies is part of the government’s water (special measures) bill, which is going through parliament and is expected to be approved this year.

The new law will allow Ofwat to ban performance-related pay altogether in certain circumstances. It also enables executives and directors to be prosecuted if an offence, such as obstructing investigations by environmental regulators, is committed with their consent, or through their negligence.

Currently, the regulator says it will force shareholders instead of customers to pay bonuses to bad companies. In 2024 Ofwat intervened in this way with three companies, including Thames Water.

The bill also enables executives and directors to be prosecuted if an offense such as sewage pollution is committed with their consent or due to their negligence.

When the EU introduced a banker bonus cap after the financial crisis, many banks responded by raising base salaries. The UK has since the cap was removed as part of a post-Brexit push to improve the City of London.

At Thames Water, chief executive Chris Weston, who is on a total pay package of up to £2.3 million, received a £195,000 bonus within three months of work after he joined in January last year. This takes his total salary from January to the end of March 2024 to £437,000. Her predecessor Sarah Bentley refused a bonus in 2022-23.

Thames Water’s plan to push through new bonus rules comes despite Ofwat allowing the company to raise customer bills by an average of £588 over the next five years, despite a poor pollution and leakage record.

The company, struggling with a £19bn debt mountain, has warned it could run out of cash next month and is scrambling to avoid. temporary renationalization.

Thames Water has agreed a £3bn loan to creditors, which must be approved by the courts. The company’s senior bondholders, which include hedge fund Elliott, have offered the utility’s management team a lucrative package of “retention” incentives.

The high pay for executives has become a flashpoint of anger at Britain’s 16 privatized water companies, which are accused of using debt to pay dividends while failing to invest enough in pollution-busting infrastructure. sewerage, water loss and leakage.

In general, English water companies have paid out £83bn in dividends in the 34 years since privatisation, while accumulating more than £74bn of debt, according to research by the Financial Times.

Charlie Maynard, a Liberal Democrat MP, said “the focus on stopping bonuses distracts from the fundamental problem that these companies are drowning in debt”.

Ofwat said in a statement that it “will pursue further action under the powers to control executive pay proposed in the government’s water (special measures) bill.”

Thames Water declined to comment. The Department for Environment, Food and Rural Affairs did not immediately respond to a request for comment.