For one boss, it's raining cash: Chief of Thames Water takes home £420,000 bonus

Thames Water chief executive Martin Baggs was awarded it on top of his £425,000 salary

By Emily Allen

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The boss of Britain’s biggest water company has been given a bonus of almost £420,000 despite imposing a hosepipe ban on millions.

Martin Baggs, chief executive of Thames Water, has collected an annual bonus of £418,359 on top of his £425,000 salary – despite overseeing a drop in profits and ‘deteriorating’ satisfaction rates among its 8.8million customers.

Mr Baggs is also in line for a further windfall of more than £1million based on company performance through to 2015 under a long-term incentive scheme.
Chief executive Martin Baggs was awarded an annual bonus of £418,359 for the year to March 31 on top of his £425,000 salary

Chief executive Martin Baggs was awarded an annual bonus of £418,359 for the year to March 31 on top of his £425,000 salary

The huge sums have reignited anger over fat cat bosses being rewarded for failure. Details of the windfall emerged as Thames along with six other firms is continuing with a hosepipe ban – backed with fines of up to £1,000 – despite Britain’s torrential weather.

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The pay-outs, detailed in the firm’s annual report, were awarded despite a 13 per cent drop in profits and ‘deteriorating’ satisfaction among its 8.8million customers.

Thames Water hit families with a 6.7 per cent price rise in April, while there was a 40 per cent increase in pollution incidents, largely related to sewage releases to rivers.
Poster issued by Thames Water on drought conditions. It announced a hosepipe ban in March

Poster issued by Thames Water on drought conditions. It announced a hosepipe ban in March

Mary Creagh, Labour’s Environment spokesman, said: ‘Customers will find this bonus bonanza hard to swallow. Thames Water just doesn’t understand the pressures facing customers during this recession.’

And the GMB water workers’ union described the pay-out as an ‘outrage’.

Gary Smith, GMB national officer, said: ‘This is a classic case of reward for failure. This money came from the hard-earned income of hard-pressed householders.’

He said the current hosepipe ban was evidence of a long-term failure of management at Thames Water, which stands accused of doing too little to capture the rainwater that falls in the region.

The company has sold off a number of small reservoirs in recent years, often for housing, with the sales helping the company to pay £5billion in dividends to shareholders since privatisation in 1989.

Currently, these shareholders are made up of a consortium led by the Australian investment bank Macquarie plus branches of the governments of China and Abu Dhabi.

Thames has managed to meet leakage-reduction targets in recent years, but the firm still loses around a quarter of the 2.6billion litres of the treated tap water that it supplies each day.

Just last week, a large section of the London Underground was flooded after contractors broke a 24in mains pipe as they tried to fix a leak, leaving 300 passengers stranded below ground.

The failure was said to have left Mayor of London Boris Johnson seething amid fears that a repeat could severely hit visitors to the Olympics.
The dried-up River Pang near Bucklebury, Berkshire. The company said the drought was 'entirely to do with the weather'

The dried-up River Pang near Bucklebury, Berkshire. The company said the drought was 'entirely to do with the weather'

Mr Baggs, 47, has spent most of his working life in the water industry since studying for a civil engineering degree at Plymouth University in the 1980s.

Apart from his salary and annual bonus, the father of two also receives an annual housing allowance of £36,000 to pay for accommodation during the week close to the company’s head office in Reading.

Mr Baggs, whose family home is in Brighton, also gets a £15,000 car allowance and £2,300 for other unspecified expenses.

Thames Water insisted that the rewards for top executives are based on performance and match those of companies of a similar size.

It said: ‘Bonuses are only awarded if we hit our operational and regulatory targets. For example, the leakage-reduction goal was hit six years in a row, 100 per cent compliance maintained at all our sewage works, best tap water quality of all the major suppliers.

‘If these targets are missed then bonuses are not awarded.’

Thames Water reported a 13 per cent drop in underlying pre-tax profits to £182.2million, which was driven by higher bad debts and higher interest costs.

The company has pledged to spend nearly £5billion in the five years to 2015, which includes water and sewer pipe replacements.

Mr Baggs said: ‘It may not seem like it, but before this year’s very wet spring we had had the driest two-year period on record in our region.

‘This meant we had to impose a temporary use ban, or ‘hosepipe’ ban, to make sure we would have enough water to go round, whatever the weather.

‘After many weeks of unusually wet and miserable weather the situation is now a lot less serious and we expect to be able to lift the hosepipe ban sooner rather than later.’

Industry sources believe the ban will be lifted completely across the Thames Water and Anglian Water areas, where reservoirs are 90-100 per cent full.

Southern Water and four other smaller firms in the South are expected to end the ban in some – but not all – areas.

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