Industry (Scotland) Bill is the first of two water bills in this
legislative session and follows the Scottish Executive consultation
paper earlier this year. It has three main parts. The first two
cover the functions and powers of the Water Industry Commissioner
for Scotland and the Drinking Water Quality Regulator. The third
and main part of the bill creates a new public corporation to be
called Scottish Water that will take over the functions of the three
current water authorities in Scotland. This briefing sets out UNISON
Scotland's initial consideration of the Bill.
Industry Commissioner (WIC) was established under the Local Government
etc (Scotland) Act 1994 and the Bill's provisions do not appear
to radically change his powers and functions. The WIC's functions
are similar to the UK utility regulators although not so extensive
or as independent of government. Given the poor track record of
utility regulators, particularly their grasp of the wider economic
and social ramifications of their decisions, UNISON would not
support any further widening of the WIC's powers.
will have a general function "of promoting the interests of
customers of Scottish Water" (s1(2)). In an increasingly competitive
environment this could be interpreted as promoting competition and
the interests of private water companies who wish to cherry pick
services. UNISON would prefer to see this explicitly excluded
in the Bill to avoid any potential conflict with wider customer
establishes in principle Water Customer Consultation Panels (s2).
The Bill does not however require Scottish Ministers to establish
them. Given the nation-wide coverage of Scottish Water UNISON
believes that "may by order establish" (s2(1)) is insufficient.
There may be an unspecified number of panels covering different
parts of the country and they will have a general consultative and
representational function. There will be a Convenor of the Water
Customer Consultation Panels who will be a member of each panel.
Scottish Ministers will appoint him/her but the Convenor will have
the power to appoint all the other members, subject to certain consultation
requirements (Schedule 1 Pt2). UNISON believes this is an extraordinary
power for one person.
functions of the WIC are set out in s3. They include investigating
complaints by "potential" customers. This would be reasonable
in respect of domestic customers but could again be widened to
promote the interests of those who wish to cherry pick profitable
Scottish Water to pay the Commissioner's expenses whereas Scottish
Ministers "may" make grants towards his/her expenses.
There are no provisions in the Bill for private water companies
to contribute towards these expenses. UNISON believes the Commissioner's
role is a public interest one and therefore the cost should be borne
by the Scottish Executive.
Water Quality Regulator
Water Regulator will be responsible for regulating the public water
supplier i.e. Scottish Water. Private supplies are the responsibility
of local authorities under the Water (Scotland) Act 1980. Here will
need to be a review of that provision to ensure that local authorities
have equivalent powers and that they are adequately resourced
to monitor what is likely to be an increasing use of private supplies.
always been sceptical about the balance of benefit in creating one
body to administer Scotland's water and sewerage functions. We have
regarded the creation of Scottish Water as a distraction from the
major challenges facing the industry. The bill proposes very broad
statutory powers with the prospect of regulation through secondary
establishes Scottish Water as a public corporation. As a creature
of statute its powers and functions are the responsibility of Parliament
although as we will see it is proposed to give this corporation
very wide powers to regulate itself. Under current Treasury rules
expenditure and borrowing would be on the public balance sheet.
However, this status might change if (or when) the UK government
adopts the rules set out in the Maastricht Treaty, known as the
Schedule 3 makes provision for the constitution of Scottish Water.
Para 2(1) of this schedule allows for the possibility of more executive
than non-executive members and the power of appointment for executive
members both in numbers and personnel remains with the board. UNISON
believes there should always be a majority of non-executive members.
In addition there should be an employee director.
governance provisions of the bill and Schedule 3 are very limited.
For example there are no provisions for the publication of minutes,
public access to meetings etc.
gives the board the power to appoint staff and set terms and conditions
with the approval of Scottish Ministers. This is a somewhat muddled
clause, as there needs to be clarity as to who is responsible
for bargaining pay and conditions.
states that Scottish Water "may" establish "one or
more pension schemes". There is no transfer provision for pensions
in s23 of the bill as TUPE does not at present cover pensions. Para
52 of the explanatory notes to the bill makes reference to the powers
in s24 that "could" be used in relation to staff pension
rights. Staff pensions rights are too important to be left to chance.
needs to be a specific statutory provision for the transfer and
maintenance of pension rights. It is also unclear if the necessary
amendments have been made to secondary legislation to ensure that
Scottish Water remains a public authority for pension transfer and
the existing water and sewerage authorities transfer to Scottish
Water under the provisions of TUPE "whether or not they would
so apply apart from this section" (s23). The TUPE regulations
are the subject of constant legal interpretation and the UK government
has been conducting a review of the regulations for some time. This
provision means that there can be no dispute over the applicability
of TUPE. However, there could still be difficulties over specific
application of sections of the regulations, particularly for functions
that may be reorganised. UNISON would therefore prefer a comprehensive
staff transfer order in addition to s23.
of Scottish Water as set out in s25 are very widely drawn. It can
do anything which "it considers is not inconsistent with the
economic, efficient and effective exercise of its core functions".
The whole structure of the industry in Scotland could be changed
with no democratic approval. Scottish Ministers will have the power
to issue directions but their approval would not be required for
such major change. The contracts could be signed before any directions
could be issued. For example, Scottish Water could turn itself into
an enabling authority with all services to the public privatised
using the powers in s25. This includes the widespread use of PPP/PFI
schemes (without ministerial approval) using powers in s25(3) and
(4). Ironically there are the usual restrictions on the far more
cost-effective conventional borrowing. UNISON believes that the
powers of Scottish Water need to be drawn more tightly. For
example, significant organisational change should require democratic
Bill repeals most of the provisions of Part II of the Local Government
(etc. (Scotland) Act 1994 which established water authorities, it
does not repeal s65(1) which requires the Secretary of State (now
Scottish Ministers) to "Promote the conservation and effective
use of water resources of, and the provision of adequate water supplies
throughout, Scotland …". It is unclear why this important duty
is being retained in other legislation instead of being codified
in the Bill.
s27 requires Scottish Water to prepare a code of practice covering
its performance standards etc and submit it to the WIC. If the WIC
does not approve it Scottish Ministers have the final say.
with charges and gives Scottish Water slightly wider powers than
exist at present. S29 for example anticipates partnerships with
private companies for the supply of services, giving Ministers the
power to set maximum charges. The charges for core functions follows
existing provisions under which the WIC advises Ministers on the
charges schemes. The provision that domestic customers cannot be
disconnected for failing to pay charges remains. It does not stop
self-disconnection through metering and the metering provisions
have not been amended by this Bill.
Water will have the power to collect charges itself or use the current
local authority system. Given the huge level of uncollected debt
this is something Scottish Water is likely to look very carefully
at. Ministers also have the power in s37 to establish a scheme of
reduced charges for certain groups.
covers the financial functions of Scottish Water. There are the
usual requirements to achieve a rate of return on assets (s38) and
this can be different for specified functions. Scottish Water will
require ministerial consent for borrowing.
will have the power to make grants to Scottish Water. There is no
requirement to make good any shortfall under a reduced charges scheme
under s37. This means other customers could be asked to cross subsidise
or the corporation's ability to compete with other suppliers could
be undermined. It would seem reasonable that the Scottish Ministers
should finance charge reductions for public policy purposes.
is no reference to existing debt other than all liabilities transferring
to Scottish Water. UNISON has consistently argued that existing
debt should be cancelled as happened in England and Wales at privatisation.
memorandum to the bill estimates that transition costs will be in
the region of £3m to £5m of which the Scottish Executive will contribute
£3m. This seems a very modest estimate and anything above this level
will have to be found from further cuts in service over and
above those already planned.
level of "operational efficiency savings" (between £100m
and £168m) has little to do with the establishment of Scottish Water.
Whilst a level of savings can be achieved through new technology
and new methods of working the rest will simply result from cuts
in customer service and reduced levels of public and staff safety.
The lessons from similar "savings" in the rail and gas
industries have not been learnt by the Scottish Executive.
Water will retain its statutory undertaking powers in relation to
land acquisition and this is extended in s44(1) to allow others
to provide services. In effect to allow private companies to
compulsorily acquire land. Under s45 it may dispose of land
"to whomsoever and for whatever purpose it wishes" so
long as it does so at market value. Whilst this is broadly the same
as the current provision, Scottish Water will have far less democratic
accountability. Scottish Water will be a major Scottish landowner
and has social obligations in that regard. It should not be able
to asset strip this heritage without some element of democratic
control. The environmental protections in s47 are meaningless
if the property is disposed of.
ministers general powers to issue directions to Scottish Water,
although as indicated above given the boards extensive powers this
may be a case of shutting the stable door…..
accountability is minimal. S50 simply requires two reports a year.
There is no requirement for any representative non-executive directors
or any other provisions to make Scottish Water accountable to the
from the Register of Trade Effluents "commercially confidential
information". In our response to the Bill's consultation paper
we drew attention to the need for a full review of the 1968 act
and increasing the powers and resources of SEPA in this area. UNISON
is concerned that this new clause could be used to avoid public
scrutiny of effluent discharges.
establishes a public corporation that will have extensive powers
to operate Scotland's water and sewerage services with minimal democratic
control. Whilst UNISON supports some commercial freedoms this should
not enable Scottish Water to change the essential structure of the
public service provision without the approval of the Scottish Parliament.
provisions of the Bill are inadequate and reflect the minimal attention
given to these issues in the consultation papers. The finances of
Scottish Water also need to be addressed by Ministers to provide
something closer to a level playing field, given their support for
is a real concern amongst staff and the public that Scottish Water
could become a public façade for a largely privatised industry.
We call upon the Scottish Parliament to ensure that the Bill is
amended to stop the gradual privatisation of Scotland's water.