A sensible pay limit would restore a public service ethos to the industry, and send a much needed message about fairness and proportionality across the wider economy. HPC Executive Director Luke Hildyard calls for a cap on water bosses’ pay.
Since publication of the Government’s review of the water industry this week, there has been a fierce debate regarding the adequacy of the review, given its failure to consider a return of water in England to public ownership.
One of the most controversial aspect or private water companies has been their executive pay practices. Many people have found it hard to reconcile the litany of financial, environmental and customer service disasters variously afflicting these companies with top pay awards that have frequently exceeded a million pounds
Following publication of the review, HPC reiterated our call from last year to cap executive pay in the industry, whether under private or public ownership, at ten times the level of their lowest-earning colleagues. We argued that this would rebuild public confidence in the sector and would still allow reasonable enough pay levels to attract competent senior managers.
While no one would doubt that oversight of critical infrastructure requires competent managers, there are limits to the levels of genius involved. This isn’t a service that risks obsolescence or necessitates great salesmanship. In the absence of people meeting 100% of their hydration needs through Dr Pepper, or maintaining personal hygiene by licking themselves clean like cats, the market for water seems well-secured.
So is a clean, reliable water supply really so contingent on these seven figure pay awards? Considering that pay of just over £150,000 puts the recipient in the top 1% of UK earners, the pool of people who might theoretically be attracted to these roles even if pay levels were cut by 75-80% is is very large (pay of ten times the annualised full time equivalent of the UK national living wage would be around £230,000).
Add the prestige, status and interesting, engaging work that any executive role involves to a pay package still greater than that enjoyed by over 99% of the population, and a cap equivalent to pay in the low hundreds of thousands looks even more like basic common sense. It probably would involve some disruption to the industry but nothing a sensible timeframe for implementation couldn’t overcome, especially if water companies were doing an adequate job of equipping enough potential future leaders with the right technical and managerial expertise.
In the absence of public ownership, this would go a long way to restoring public confidence that the people responsible for providing a critical public utility are motivated by a public service ethos, rather than their own enrichment.
It would also send a firm message about the limits to our indulgence of executive entitlement that would hopefully resonate across the wider economy.