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The smell of inadequate regulation around England’s water firms

<span>Photograph: Chris Robbins/Alamy</span>
Photograph: Chris Robbins/Alamy

Emma Howard Boyd, chair of the Environment Agency, wasn’t holding back. Fines for polluting water companies in England should be much greater, errant directors should go to jail in the worst cases and investors should not enjoy a “one way bet”. All are reasonable ideas. The current state of pollution in rivers is indeed “shocking”, “unacceptable” and all the other damning descriptions found in the EA’s annual environmental performance report on the water firms.

Serious pollution incidents increased to 62, the highest total since 2013. Seven of the nine privatised firms oversaw increases on 2020 in serious incidents. Only three companies – Northumbrian, Severn Trent and United Utilities – got a four out of four star rating.

Emma Howard Boyd
Emma Howard Boyd has been chair of the Environment Agency since 2016. Photograph: Sophia Evans/The Observer

Yet the worsening performance prompts an obvious question: how has the EA, the main public body for protecting the environment in England, allowed things to deteriorate this far?

You’ll find little regulatory self-reflection in the report. The closest to it was a new ambition to pursue repeat corporate offenders via criminal prosecutions in less serious incidents, rather than rely on civil powers. Yes, that sounds a good idea – but it would also have been a good idea a decade or two ago. The EA averaged seven prosecutions a year between 2015 and 2021. That’s not many.

Feargal Sharkey, campaigner extraordinaire in this area, rightly pointed out that Howard Boyd has been on the board of the EA for 13 years, has been its chair since 2016 and as recently as August 2019 was writing letters to newspapers about how “water quality in our rivers is now better than at any time since the start of the Industrial Revolution”.

To be fair to her, she was also calling for more government funding for the EA and heavier fines even back then. But the new ramp-up in rhetoric has arrived very late in the day, as has the ongoing major investigation by the EA and Ofwat, the price regulator, into sewage discharges. One suspects more terror would be created in boardrooms if the entire regulatory framework for the water industry in England were to be overhauled under fresh leadership. The stench of regulatory drift has also been shocking.

Where Pret might put some of its money

The purpose of Pret a Manger is “to make every day a little brighter”, says the annual report, and the coffee and sandwich outfit has fulfilled this ambition to the max in the case of chief executive Pano Christou. In a year in which the business made a £125m operating loss and £255m pre-tax loss, he was awarded £4.2m in pay, mostly comprising a one-off bonus and share awards, as we report today.

Pret is owned by JAB Holding, a private investment firm that primarily manages money for the German Reimann family, which made its billions in the Benckiser consumer goods group. So, one might say that, if JAB wants to ignore a profit-eliminating pandemic at Pret and throw big incentives at Christou, that’s up to it.

Except the annual report also details the sums of UK public money claimed by Pret to keep the business alive during lockdown. Over 2020 and 2021, about £100m arrived via the furlough scheme to support staff wages; and the company was relieved of the burden of paying £31m in business rates.

There is no obligation on Pret to return a single penny to HMRC or the Treasury, it should be said. Job losses were minimised, just as ex-chancellor Rishi Sunak intended for the hospitality sector. Nor did JAB get a free lunch: shareholders injected £285m of fresh capital along the way.

Yet if JAB can afford a near-£4m bonus for Christou and thinks Pret is “very well set for 2022 and subsequent years”, it might wish to consider a voluntary return of a few quid of public money. Many others have done so, and not all say they try to brighten life by “doing the right thing,” as the annual report also put it. Customers can form their own view.

An ominous minnow

So Admiral (share price down 18% on Thursday) and Direct Line (pranged by 11%), what do you make of these inflationary storms ripping through your car insurance sector? You know: the delays in getting car parts, the extra costs of providing replacement vehicles for customers, and so on.

Relative minnow Sabre Insurance was the cause of the falling share prices as it delivered a thumping profits warning. Its own share price fell 40%. But its chief executive, Geoff Carter, was also adamant: “We believe our performance will compare favourably to the wider market.” He’s either entirely wrong, or his bigger rivals ought to give shareholders a damage-assessment sharpish.