Options give water chiefs `£4m gains'

Share option schemes have handed a £4m paper profit to 25 water company directors, including £413,000 for David Cranston, chief executive of Northumbrian Water, and £358,600 for Roderick Paul, chief executive of Severn Trent, according to claims made tonight in BBC1's Panorama.

The programme also alleges that the water companies have left unspent hundreds of millions of pounds intended for sewer repairs and other renewal work, and says some of it has been used to boost profits.

But the accusation was rejected by the companies, which denied that they had indulged in financial trickery or delayed spending. They said money had been spent on other, more urgent priorities than sewerage.

The programme cites experts who claim the companies should have financed more of their investment from borrowings and share issues rather than from higher prices for customers.

One City analyst says on the programme that borrowings as a proportion of shareholders' funds could treble to 60 per cent without causing financial strain. He calls Ian Byatt, the water industry regulator, a "wimp".

Industry observers said last night that Mr Byatt had moved to tackle gearing. He has cut the industry's allowable annual price rises from inflation plus 5 per cent to inflation plus 1.5 per cent for the next five years.