The ‘super deduction’ scheme introduced by Rishi Sunak during his tenure as chancellor post-Covid enabled the water industry to secure £97 million in tax rebates.
Last year, despite several water companies discharging sewage into water bodies, ten of them paid zero tax. New data reveals that the water sector secured around £97.1 million in tax deductions due to the government’s post-Covid “super deduction” rebate policy, as highlighted by the Liberal Democrats.
Northumbrian Water, which recorded the largest tax rebate of £21.9 million, also distributed a £105 million dividend this year. Rishi Sunak, during his time as chancellor in 2021, implemented tax rebate policies that provided companies the opportunity to claim rebates equating to 130% of their investment. The intent behind this move was to rejuvenate the economy post-pandemic.
Contrastingly, only one company paid no tax the preceding year. This comes during a period where water firms faced criticism for discharging sewage into England’s rivers and seas, an issue attributed to long-standing underinvestment. In 2022, water companies discharged sewage for approximately 1.75 million hours, with Northumbrian Water alone accounting for 100,000 hours. Concurrently, the company also paid dividends for the first time in three years due to increased revenues.
Addressing the rebate figures, a representative from Northumbrian Water clarified that it’s incorrect to state the company received a £21.9 million tax rebate. They stated, “We had a £3.1 million current tax charge and a deferred tax credit of £25 million, which will be forwarded to future years.” They further explained that a significant portion of the deferred tax arises from the company’s £49 million loss that year and from claiming capital allowances.
Highlighting beach pollution, Wessex Water, despite facing criticism, reported an estimated £17.8 million rebate and allotted £1.9 million towards executive bonuses and salaries. Similarly, South West Water, penalized £2.15 million for unlawfully discharging sewage between 2016 and 2020, obtained approximately £8.6 million in rebates, distributing £1.2 million to its executives. These tax figures originate from the House of Commons Library, which utilized the Fame database, referencing Companies House filings.
Although water companies have permission to release sewage into water bodies to prevent backflows into households, this should only be a last-resort measure. They’ve been criticized for not sufficiently investing post-privatization to upgrade sewage systems to accommodate rising populations and adjust to climate change. The House of Lords Committee noted inadequate investment levels that couldn’t meet the increasing demands, resulting in the release of polluted water into the environment.
Dubbing the tax deductions the “Sunak Sewage Tax Cut”, the Liberal Democrats have called for urgent reforms in the water industry. Ed Davey, the party leader, emphasized the Conservative Government’s apathy in enabling polluting water companies to claim millions in taxpayer money without addressing the sewage problem.
Wessex Water responded, emphasizing their adherence to all government-set tax legislations. A government representative underlined the importance of investment, strict regulations, and enforcement to combat sewage pollution. They highlighted the super-deduction’s intent, which anticipated an influx of approximately £20 billion yearly across the economy and the water sector’s commitment to fast-track £2.2 billion of investment over the next couple of years, focusing on pollution mitigation.
