Water company chiefs who preside over illegal sewage spills face a ban on their bonuses.

Environment Secretary Steve Barclay is set to block payouts to executives of firms that are polluting rivers, lakes and seas, starting with bonuses in the 2024-25 financial year from April.

Campaigners, Labour and the Liberal Democrats have been calling for the policy amid outrage at bosses pocketing more than £26 million in bonuses, benefits and incentives over the last four years.

Senior executives from five of the 11 water companies that deal with sewage took bonuses last year, while at the other six they declined after public anger.

At the same time, companies plan to hike consumers’ bills by about £156 per year to pay for investment to prevent 140,000 sewage overflow spills a year.

Regulator Ofwat will consult on details of the proposed ban later this year, including to define the criteria.

This could include successful prosecution for the two most serious categories of pollution, such as causing significant pollution at a bathing site or conservation area, or where a company has been found guilty of serious management failings, according to the Department for Environment, Food and Rural Affairs.

It could apply to chief executives and all executive board members.

If taken forward, Ofwat would implement the measures by changing the conditions of water company licences.

Mr Barclay said: “No one should profit from illegal behaviour and it’s time that water company bosses took responsibility for that.

“Tougher action is needed to address poor performance by water companies, which is why I am pleased Ofwat is going further today on bonus payments.

“In cases where companies have committed criminal breaches there is no justification whatsoever for paying out bonuses. It needs to stop now.

“I will shortly be setting out more detail on further steps to clean up our waters, including reducing the reliance on water company self-monitoring in order to hold them to account and drive the improvements we all need to see.”

Labour’s shadow environment secretary Steve Reed said: “Once again Labour leads, the Conservatives follow.

“Labour called for the water regulator to be given new powers to block bonuses for polluting water bosses last year. After doing nothing for 14 years, the Conservatives have now been shamed into adopting Labour’s plan.

“But they must go further and back Labour’s whole plan to clean up our rivers, and ensure that executives who are responsible for repeated illegal sewage dumping, face criminal charges.”

Labour has said that under its plans, Ofwat could have blocked six out of nine water bosses’ bonuses last year.

An Ofwat spokesperson said: “We introduced new measures last year to ensure that executive bonuses are linked to delivering better outcomes for customers and the environment.

“Today’s announcement builds on that approach but takes it even further. We will consult on the detail of the proposals later in the year”.

Lib Dem environment spokesperson Tim Farron said: “Finally, ministers have buckled to a campaign led by the Liberal Democrats over two years ago but, even now, this attempt to ban bonuses sounds too weak and feeble.

“The public has looked on in fury as Conservative MPs defended these disgraced water firms and refused to crack down on insulting bonuses.

“Every day, these polluting and profiteering firms get away with environmental vandalism. The bonuses should be banned today, regardless of criminal conviction.”