UK bans bonuses at Thames Water and five others for pollution failures

LONDON (Reuters) -Britain banned Thames Water and five other water companies from paying bonuses to their bosses because they had failed to tackle pollution, in its latest effort to overhaul the industry's poor environmental record.

The government has said the water industry in England and Wales is broken. Thames Water is at the centre of a scandal after years of under-investment resulted in sewage spills, while it continued to make profits and pay executive bonuses.

Under a new law which takes effect on Friday, Thames Water, Yorkshire Water, Anglian Water, Wessex Water, United Utilities and Southern Water will not be allowed to pay bonuses to executives for the year that ended in April.

Thames Water had said in May it would halt a bonus scheme after ministers objected.

The company is being investigated for seven major pollution incidents, defined as a sewage spill which kills fish on a large scale, lasts for a long time or is widespread, while the other companies are being investigated for one. Wessex Water has been convicted of one.

Thames, Britain's biggest supplier, also failed to meet financial resilience standards. It is trying to attract new investment to avoid collapse.

"Water company bosses, like anyone else, should only get bonuses if they've performed well, certainly not if they've failed to tackle water pollution," environment minister Steve Reed said in a statement on Thursday.

Last year water companies paid out 7.6 million pounds in executive bonuses, the government said.

Northumbrian Water, Severn Trent and South West Water are the only companies permitted to pay bonuses this year, it said.

Regulator Ofwat will monitor the companies to ensure they do not increase salaries in response to the bonus ban, and will be able to claw back and fine companies which break the rules.

In the longer term, the government wants wholesale reform of the sector. An interim report published on Tuesday recommended stronger and smarter regulation.

(Reporting by Sarah Young, Editing by Paul Sandle)