Charities awaiting grants from an £11 million fund—sourced from water company pollution fines—have condemned the UK government’s potential decision to divert the money to the Treasury, calling it a serious betrayal of trust.

“I appreciate that the Labour government have inherited a mess, I am a Labour supporter myself, but I think this is a really deeply appalling decision for a Labour government given the promises they made, and it is a really worrying indication of where we are headed,” said Kathryn Soares, chief executive of the Nene Rivers Trust.

Soares is among many who have waited over eight months for funding meant to restore rivers damaged by sewage pollution. However, Chancellor Rachel Reeves now intends to redirect these funds to government coffers.

Since Labour took office in July, charities and organisations—including groups supporting veterans—have struggled to receive clear answers about their applications. Many say they have been “fobbed off” by the new administration.

Soares warned that if the Treasury seizes the funds, it would break Labour ministers’ promises.

“It doesn’t fill me with confidence as a small charity working on defending the environment in the context of climate change … to have a promise of help reneged upon is really heartbreaking.”

The water restoration fund was introduced under the Conservative government to ensure polluting water companies paid for the environmental harm they caused. Charities across England applied for grants last spring, with the scheme quickly becoming oversubscribed.

Luke Bryant, assistant director at West Cumbria Rivers Trust, said his organisation invested significant time and resources into applying for two projects worth £260,000.

“This is a small amount of money for the Treasury. It has not been raised from taxpayers. It has come from fines for environmental damage water companies have caused, if money is not spent at local level on environmental restoration it would go against what people were led to believe was going to happen.”

Similarly, Gilly Norton, CEO of Supporting Wounded Veterans, had applied for £250,000 to fund two projects scheduled to begin this summer.

One initiative aimed to support six veterans suffering from PTSD by involving them in a river restoration project on the River Dart in Devon. The veterans had already completed training, but without funding, the project remains on hold.ç

“There is outrage that this money could now go to the Treasury. It is a total breach of trust by the government,” Norton said.

Concerns are growing that not only will the £11 million fund be redirected, but future fines—totalling hundreds of millions of pounds—could also be absorbed by the Treasury. Thames, Yorkshire, and Northumbrian Water have been fined a combined £168 million for widespread illegal sewage dumping, with further penalties expected as pollution levels hit record highs.

Richard Benwell, chief executive of Wildlife and Countryside Link, emphasised that the government must uphold the “polluter pays” principle and ensure future fines are dedicated to environmental restoration.

Martha Meek, director of the River Waveney Trust, which made a joint bid for a £205,300 grant, including funding for citizen science water quality testing, said: “Water company fines need to be directed to the catchments they relate to if we all stand a chance of securing a better future for our rivers. These funds must not be lost within government budgets.”

Stuart Singleton-White, head of campaigns at the Angling Trust, warned that allowing the Treasury to claim these funds would severely damage the government’s credibility. For years, his organisation has advocated for water company fines to be used exclusively for restoring polluted rivers.

“They made a manifesto commitment to clean up our rivers and seas and to hold water companies to account. We call on this Labour government not to make such a foolish decision. They must retain the fund, maintain the principle of the polluter pays, and ensure the money from fines is invested back into cleaning up our rivers and seas.”

The Treasury and the Department for Environment, Food and Rural Affairs (Defra) said in a joint comment that they were “continuing to work on how water company fines and penalties can be reinvested on water environment improvement”.

Despite mounting pressure, the Department for Environment, Food & Rural Affairs (Defra) declined to clarify whether future fines would be ringfenced for environmental restoration in affected areas. The lack of commitment has fuelled fears that critical restoration projects may be permanently stalled, undermining efforts to address widespread river pollution in England.