Minister calls doubling of Southern Water chief's bonus ‘outrageous'

Times

6 days ago

The doubling of the boss of Southern Water's pay to £1.4 million has been called 'outrageous' by ministers, as questions arise about whether Labour's bonus ban is being skirted by inflated pay.
Lawrence Gosden, Southern's chief executive, was awarded £691,200 under a two-year long-term incentive plan (LTIP), as well as £687,100 in fixed pay for the utility's last financial year, the company's results filed earlier this month show.
Steve Reed, the environment secretary, told the BBC's Sunday with Laura Kuenssberg: 'It's outrageous in my opinion. They are a private company and they can take their own decisions about pay. But I would really would implore them to think about how this looks to their customers.'
He added: 'Trust between the water companies and their customers is at the lowest point probably ever. By paying their senior executives raises of that kind, what message are they sending to their customers?'
A significant chunk of Gosden's increased pay package is a £111,400 'benefits' payment, up from £22,900 the year before.
Much of that is understood to have paid for Gosden's relocation from the Thames Water region to Southern Water's patch, which includes Hampshire, Sussex, Kent and the Isle of Wight. Such payments are commonplace in the sector for senior leaders, industry sources said.
The bonus column for Gosden's pay shows zero. That is because he was banned from taking it by the Labour government due to Southern Water causing a category one pollution incident, the most serious kind. It would have been worth £396,475 if he had been able to take it.
However, most of his doubling in pay this year was due to the LTIP. The payment is not covered by the government's bonus ban, but Labour has previously counted LTIPs as bonuses when taking aim at executive pay. MPs have also raised concerns about 'retention' bonuses paid to Thames Water executives, which are not affected by the ban as it is related to performance rather than retention.
Helena Dollimore, the Labour MP for Hastings and Rye, called Gosden's pay rise a 'slap in the face' given water outages faced by her constituents. Southern Water argued it is justified because it is linked to Gosden successfully delivering a company-wide 'turnaround plan'. It pointed to an 18 per cent fall in leaks this year and a fall in total pollution incidents. The LTIP is paid by shareholders, not Southern's customers, it noted.
Gosden, 56, is an engineer and water industry veteran who has gradually worked his way to the top in a career spanning more than three decades. He received a first-class honours degree in engineering at the University of Brighton before starting as a contractor for Southern and then joining the company itself.
He later spent 12 years at Thames Water in a series of roles, including managing director of wastewater and chief operating officer. In 2020, he rejoined Southern before he was appointed as a chief executive to turn around the company in 2022, a point when the company was struggling financially and had just been fined £90 million for a major pollution incident.
Southern is challenging a decision by Ofwat, the regulator, to allow bills to rise by 53 per cent. Southern had sought to raise them by 83 per cent. Gary Carter, the national officer at GMB Union, said it was 'abhorrent' for Southern's chief executive to 'trouser more than a million pounds' after just announcing a hosepipe ban and leaks. 'It encapsulates everything that's wrong with our broken, privatised water system,' he said.
A Southern Water spokesman said: 'Chief executive and chief financial officer salaries and benefits are decided by the remuneration committee, with a majority membership of independent non-executive directors, and following protocols and rules set out by Ofwat and in accordance with the law.'