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Scotland's
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Link
to Water Pages
Draft Water Services (Scotland) BillUNISON Scotland's response to Scottish Executive Consultation on Proposed Provisions for the Water Services (Scotland) BillJanuary 2004 Executive Summary
IntroductionUNISON is Scotland's largest trade union representing over 150,000 members working in the public sector. As the largest trade union in the Scottish water industry, UNISON members are both providers and users of water in Scotland. UNISON Scotland welcomes the opportunity to comment on the Scottish Executive's consultation on proposed provisions for the Water Services (Scotland) Bill. This response needs to be seen in the context of our previous submissions to recent Scottish Executive consultations on the water industry. The Draft BillThis is the latest of a number of legislative developments affecting the water and sewage industry in Scotland including the establishment of a public water corporation, Scottish Water and a revised regulatory framework. This bill focuses on the development of competition in networked water and sewage. Competition already exists in off-network services. The driver for this legislation is the UK Parliament's Competition Act 1998 that seeks to prevent the restriction or distortion of competition and the abuse of a dominant market position. UNISON Scotland water briefings have previously highlighted the danger of this ill thought out legislation for essential public services. In essence the draft Water Services (S) Bill seeks to implement the provisions of the Competition Act whilst minimising the adverse impact on Scotland. It should however, remind the Scottish Parliament to be vigilant about other international competition initiatives that impact on public services. In particular, reforms of the EU internal market and GATS. The draft Bill seeks to create a structure that balances the alleged benefits of competition with the obvious risks to what is an essential public service. The Executive is therefore proposing the following:
UNISON ResponseRisks and benefits of competition The policy basis for this section of the consultation takes a more realistic view, than the original Water Services Bill consultation in 2001, on the alleged benefits of competition. Experience in other utilities has shown that the alleged benefits are more apparent than real and comes at a significant cost to the consumer. UNISON rejects the view that competition in essential utilities brings benefits to consumers. There is no evidence to support the contention that competition "encourages efficiency, keener prices, greater customer responsiveness, innovation and improved standards". The Competition Act 1998 introduced a new framework for competition bringing into domestic law (this is a reserved power to the UK parliament) provisions which enact European law on this issue. In particular it introduces new sanctions for anti-competitive behaviour. The Act applies to Scottish Water and is enforced by the Director General of Fair Trading (DGFT) as the WIC in Scotland does not have the same powers as the water industry regulator in England and Wales, OFWAT. The Act includes provisions for exemptions and exclusions on a number of grounds. UNISON believes that the provisions of Schedule 3 (7) remain a sound basis for an exclusion under the Competition Act. Water and sewerage is an essential service in a civilised society and competition puts that service at risk, particularly for disadvantaged customers. The public policy grounds could relate to rural, economic and social exclusion strategies under this heading. In addition the Executives environmental objectives will be difficult to achieve in a competitive framework and this provides a further public policy basis for an exclusion. Prohibiting common carriage on the public networks UNISON Scotland agrees that the risks to public health and the environment outweigh any foreseeable benefits from allowing access to public water and wastewater systems. In our response to the original Water Services Bill consultation we highlighted some of the many technical difficulties in achieving common carriage including:
Scottish Water would have to be responsible for managing a comprehensive access code to ensure that there was adequate supply. This code would be enormously complex covering all possible situations including seasonal demands, bursts, drought provision etc. There would also have to be costly physical systems in place to isolate new entrants supply and provision for ‘last resort' supply. The consequences of common carriage even with costly systems intervention could include at worst contamination of water supplies or at best interruption and damage to the water and sewage infrastructure. The public health consequences are obvious and therefore the provisions in the draft bill prohibiting common carriage are welcome. Prohibiting retail competition for households. UNISON Scotland agrees that retail competition poses risks for households. For household customers water charges, linked to Council tax bands, reflect broadly the ability to pay. The current arrangements include a discount for single adult households. UNISON supports revisions to the current banding system being considered as part of a wider review of local government finance. Competition would bring separate water charges and the loss of the essential progressive charge basis, which is in our view a requirement for an essential public service. There is no practical alternative to piped water and sewage disposal. The arrangements in place in other competitive utilities for disadvantaged consumers are generally very limited. For example fuel poverty still impacts on one in six Scottish households despite the excellent measures taken by the Scottish Executive to address this issue. The consultation paper rightly identifies the serious risk that new entrants to the market would ‘cherry-pick' high-banded properties. UNISON highlighted this risk in the original Water Services Bill consultation. This has also been the experience in other utilities where existing suppliers have been forced, because of competition, to chase ‘high value' customers at the expense of other consumers. Not only would charges increase for most consumers but Scottish Water would be left with stranded assets brought about by off network provision. UNISON Scotland therefore agrees that competition would develop in a way that would not benefit all customers and welcomes the provisions in the draft bill prohibiting this form of competition. Licensing non-household retail competition UNISON Scotland does not support the introduction of retail competition in non-households. The 160,000 premises covered by this competition are a significant part of Scottish Water's operation. Business separation will be a further and unwelcome disruption to the corporation, which is attempting to address the long-standing problems facing the industry. Some of the main problems include:
ConclusionUNISON Scotland broadly welcomes the provisions of the draft bill as being a more realistic recognition of the realities of the industry that those set out in the original Water Service Bill consultation in 2001. The major problem relates to the proposals for non-household retail competition. We suspect that this more modest proposal reflects a concern to be seen to provide an element of competition in accordance with the philosophy inherent in the Competition Act. However, the proposals still constitute a major upheaval for little value to the consumer. It is also a further stage along the road to the full privatisation of Scotland's water.
For further information please contact: Matt Smith, Scottish Secretary e-mail matt.smith@unison.co.uk
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