Water companies circumventing bonus rules? What did ministers expect? | Nils Pratley

Door was left open to such behaviour because the regulator for England and Wales can only use the powers it was given by parliament

• Thames Water’s £1m payout to finance chief is ‘unacceptable’, says government department

Anybody who followed the supposed “clampdown” on bankers’ bonuses after the great financial crash in 2008 knew what to expect when water company bosses became a similar target for a bash in the bonus department. We would see the waterbed principle in action: when you push down in one area of remuneration, such as the performance-related stuff, another tends to go up.

Back in the day, banks invented “role-based allowances” – salary top-ups – to “compensate”, as they put it, their top earners for being subject to EU caps on bonuses. No executive was seriously inconvenienced by forgoing the chance of an astronomical (but not guaranteed) bonus and getting a smaller (but still hefty) increase in fixed pay instead. Some even preferred greater certainty over what they would take home.