Thames Water has decided to “pause” its scheme to pay out big bonuses to senior executives linked with securing its £3bn rescue loan.

The decision comes after Downing Street said bosses at the troubled firm “rewarding themselves for failure is clearly not acceptable”.

The company’s “retention scheme” was set to amount to 50% of senior bosses’ pay packets, which could have led to them getting £1m on top of their annual salaries and regular bonuses.

Thames had been accused by the environment secretary of “trying to circumvent” forthcoming rules to ban water companies from paying bonuses.

Steve Reed told MPs on Tuesday the company had been “calling their bonuses something different so they continue to pay them”.

Downing Street added ministers were “clear that, after presiding over years of mismanagement, Thames Water should not be handing itself bonuses”.