How the polluters get paid

It's The oldest maxim in environmental regulation: the polluter pays. Polluting firms, this principle holds, should themselves bear the costs of the damage their wastes do to the environment, rather than let the Government pick up the bill; only then will they have a direct incentive to run things in a cleaner way.

But two surveys of the top 10 water companies, carried out by the Independent on Sunday and the Labour Party, suggest a much more depressing axiom: the polluters are paid. The 10 water service companies in England and Wales (those dealing with sewage disposal as well as water supply) are, new figures reveal, the worst single group of persistent polluters in the country - yet many senior managers are on their way to becoming millionaires.

Since privatisation of these giant undertakings in 1989, they have between them been convicted in the courts of no fewer than 237 serious pollution offences, involving crude sewage, oil and chemicals getting into watercourses and killing tens of thousands of fish.

Last year alone they were responsible for 48 major pollution incidents, and in court appearances the companies have continually been accused of complacency and slack management. Yesterday Britain's top environmental regulator, Ed Gallagher, chief executive of the new Environment Agency, laid the blame for continuing pollution directly on management failure.

"It is true that since privatisation the water industry has made significant investment in improving the sewage infrastructure where legislation has required it to do so," he said. "But it seems to me that some of the environmental benefits which this has brought about are being cancelled out by the failure of management to ensure that their operations are being run with due care and attention.

"Environmental protection depends on prevention and high operating standards. Prosecutions against water companies at the rate of two to three a month since privatisation clearly reveal that management has yet to grasp that fact."

Yet many executive directors of these companies are being paid a king's ransom. A survey by the Labour Party of the total pay and benefits packages of the directors of nine of them - information on Northumbrian Water, the subject of a merger, is not available - shows that 12 are already earning potentially more than half a million pounds a year in salary, bonuses, pension contributions and share options. The average annual pay and benefits package of the 43 executive directors is pounds 432,821.

One man, William Courtney, executive chairman of Southern Water since privatisation, receives by Labour's calculations an annual package worth pounds 1,040,707.

Mr Courtney, 72, a career water manager, is a keen yachtsman. But a mere two months ago his company was fined pounds 8,000 for two pollution incidents no yachtsman could ever be proud of.

One was polluting with sewage sludge the estuary of the River Itchen, where it flows into Britain's premier sailing venue, the Solent; the other was polluting Southampton Common model boating lake.

Only last week his firm was fined pounds 3,500 for killing more than 3,000 fish when sewage flowed into Eden Brook near Lingfield on the Surrey- Sussex border.

Mr Courtney and his three executive director colleagues are together the biggest-earners in all the water companies. Southern's group managing director, Martyn Webster, has a package estimated by Labour as worth pounds 779,809; the group finance director, Ramond King, one worth pounds 603,743; and the group technical director, Keith Tozzi, one worth pounds 556,983. The total annual benefits package of these four men alone is calculated by Labour to be worth no less than pounds 3,136,242.

There are many similar examples of highly paid bosses of highly polluting companies. Take Sir Desmond Pitcher, 61, chairman of United Utilities, the company now taking in the former North West Water. Labour calculates Sir Desmond's package at just under a million a year - pounds 954,905 - yet he is presiding over the water company with the third-worst record; it has been prosecuted 31 times.

This year his firm was fined pounds 4,000 for allowing sewage to flow into the River Rothay at Ambleside in the heart of the Lake District, which resulted in dead fish being found floating on half a mile of the river.

The worst-offending company is Birmingham-based Severn Trent, whose chief executive, Victor Cocker, has a package calculated by Labour to be worth pounds 464,943 annually. The company has a record of 40 pollution convictions since 1989, including a pounds 175,000 fine only last week for a leak of the chemical ferric sulphate into the River Wye, which killed 33,000 salmon.

During this case, Mark Bailey for the Environment Agency told Cardiff Crown Court: "Severn Trent caused this catastrophe through a collection of errors, including bad management and inferior maintenance."

Two months ago Severn Trent had been in court in Derby, where it was ordered to pay pounds 11,000 in fines and costs over an incident in which diesel oil flowed into the River Derwent. Passing sentence, the magistrate said: "Work was not carried out as carefully as it could have been and the complacency of the workforce was obvious. Cavalier treatment seems to have been the order of the day."

The former Welsh Water, now named Hyder, is the second worst offender, with 33 convictions, followed by United Utilities (North West Water), 31; Yorkshire Water, 30; Thames Water, 28; Anglian Water, 26; Southern Water, 19; Northumbrian Water, 11; Wessex Water, 12; and South West Water, 7.

After being fined pounds 8,000 for polluting a brook with sewage, Yorkshire Water was told by the magistrate in February last year: "The company action has substantially fallen below the level of duty and care expected from such an undertaking."

Ten months later, last December, the firm returned to court and was fined pounds 3,000 for polluting a river with lime; two months after that it was back again and fined pounds 14,000 for two incidents when sewage killed thousands of fish near Beverley, north of Hull.

According to the Environment Agency, the latter pollution was so bad that a fishing competition had to be abandoned when fishermen's lines became entangled with condoms, faeces and other debris.

In February this year Thames Water was fined pounds 9,000 for polluting the River Wey with sewage, which killed 60,000 fish; in April it was fined pounds 8,000 for allowing sewage intoBarkham Brook near Reading; and two weeks later it was fined pounds 15,000 for allowing oil to pollute three miles of London's River Brent.

The Water Services Association defended its members yesterday, saying: "The water industry has invested pounds 17bn since 1989 - nearly three times the amount invested in the six years leading up to privatisation. A further pounds 22bn investment has been estimated up to the year 2005.

"Given the scale of the task the water service companies were faced with, a great deal has already been achieved. Of course there is still a lot more to be done - if that were not the case the industry would not be prepared to spend a further pounds 22bn." But Frank Dobson, Labour's environment spokesman, was scathing: "These are companies who are supposed to comply with the law. They are not supposed to be performing in a way which leads to prosecution.

"They have become the Arthur Daleys of the environment, operating in a dodgy never-never world, and that is not the way it should be.

"The theory of court appearances and fines is that it should be so embarrassing and humiliating that they won't do it again. But if they aren't bothered about their reputations, the fines should be increased until shareholders start asking questions."

The top earners: water bosses' current pay

Total pay packages

(includes salary, bonuses, other emoluments, pension fund contributions, share options)

pounds 1,040,707 William Courtney Southern Water Executive Chairman

pounds 954,905 Sir Desmond Pitcher United Utilities Chairman

pounds 846,949 Derek Green United Utilities Managing Director

pounds 779,809 Martyn Webster Southern Water Group Managing Director

pounds 762,737 Brian Staples United Utilities Chief Executive

pounds 662,852 Nicholas Hood Wessex Chairman

pounds 603,743 Raymond King Southern Water Group Finance Director

pounds 594,664 Bob Ferguson United Utilities Group Finance Director

pounds 556,983 Keith Tozzi Southern Water Group Technical Director

pounds 529,987 Colin Skellet Wessex Chief Executive

pounds 526,738 Paul Twamley Hyder Group Finance Director

pounds 521,241 Alan Smith Anglian Group Managing Director

pounds 497,297 Keith Court South West Water Executive Chairman

pounds 495,644 Mike Hoffman left Thames 31/3/96

pounds 485,521 John Beckitt United Utilities Managing Director

pounds 464,943 Victor Cocker Severn Trent Chief Executive

pounds 460,890 Graham Hawker Hyder Chief Executive

pounds 432,969 Brian Charles Hyder Group Water Services Director

pounds 389,872 Nicholas Wheatley Wessex Finance Director

pounds 389,490 Bill Alexander Thames Group Managing Director

pounds 388,030 David Luffrum Thames Group Director

pounds 347,485 Chris Mellor Anglian Group Finance Director

pounds 342,401 John Green Anglian Group Technical Director

pounds 332,148 Sir Gordon Jones Yorkshire Chairman 1995/6

pounds 322,690 Kenneth Hill South West Water Executive Director

pounds 321,828 John James Hyder Group Commercial Director

pounds 320,130 Alan Costin Severn Trent Group Finance Director

pounds 312,243 Brian Duckworth Severn Trent Managing Director

pounds 296,600 Stuart Doughty Hyder Group Engineering Services Director

pounds 289,026 Martin Bettington Severn Trent Managing Director

pounds 278,510 Bill Harper Thames Group Director

pounds 269,470 Colin Drummond South West Water Executive Director

pounds 267,522 Robin Gourlay Anglian Chairman

pounds 258,756 Trevor Newton Yorkshire Executive Director 1995/6

pounds 258,008 Bruce Hewett South West Water Executive Director

pounds 224,000 Bill Fraser South West Water Executive Director (resigned 29.2.96)

pounds 212,624 Sir Robert Clarke Thames Chairman

pounds 211,360 Ian Evans Hyder Chairman

pounds 203,415 Tony Ward Yorkshire Executive Director 1995/6

pounds 153,906 Jonson Cox Yorkshire Executive Director 1995/6

pounds 147,291 Robert Batty South West Water Executive Director

pounds 110,000 Richard Ireland Severn Trent Chairman

pounds 103,000 Malcolm Batty Yorkshire Executive Director 1995/6