Millions of pounds in fines imposed on water companies will be directed toward environmental projects aimed at protecting the UK’s waterways, following concerns that the funds might otherwise be diverted to the Treasury.

The Water Restoration Fund, established by the Conservative government, ensures that companies responsible for pollution contribute to repairing the damage they have caused. Between April 2022 and October 2023, the fund accumulated £11 million from fines and penalties.

In January, reports emerged suggesting the Treasury was considering retaining money earmarked for nationwide restoration projects. However, river trusts have now submitted proposals to improve and monitor the health of various rivers, including the River Derwent in Derbyshire and the River Waveney on the Norfolk-Suffolk border.

Successful applicants will be notified on Monday, with projects set to commence this year. The initiatives will focus on enhancing water quality in the same regions where water companies were penalized for pollution.

Environment Secretary Steve Reed said:
"After years of neglect, our rivers, lakes, and seas are polluted with sewage. The scandal ends now.

This government has already placed failing water companies under tough special measures through the Water Act, granting new powers to ban bonuses for polluting executives and prosecute offenders. This week, we’re going even further—investing millions from water company fines into cleaning up our waterways."

The announcement follows the passage of the Water (Special Measures) Act last month, which enforces stricter accountability for water firms. New regulations will hold water company executives personally criminally liable for violations. Additionally, firms will be required to install monitors on every sewage outlet, with data independently reviewed by regulators.

Environmental groups had pushed for an amendment ensuring that all future fines imposed on water firms would be ringfenced for restoration efforts. However, this provision was not included in the final bill, and ministers continue to face questions about how future fines and penalties will be allocated.

Charles Watson, chair of River Action, welcomed the funding but criticized its limited scale compared to water company payouts:

"Every pound allocated to local communities for river restoration is welcome, and we appreciate it. However, the £11 million in this fund is a mere rounding error compared to the billions water firms have distributed to shareholders and lenders."

Meanwhile, an independent commission is conducting the largest review of the water industry since privatisation. Ministers argue that the findings will help shape future legislation, ensuring the necessary investment to clean up the UK’s waterways and restore public trust in the sector.