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3 October 2003

Ian Smith
Water Customer Consultation Panels
Convener's Office
Ochil house

Dear Ian

Principles of Charging for Water and Wastewater

Thank you for forwarding copies of the above report. As you will be aware UNISON is Scotland's largest trade union and our members have a direct interest in this issue both as users of this essential public service as well as the main union representing staff in the industry.

We welcome the publication of this report as an important contribution to the debate over water charges. As your introduction makes clear there is real ignorance of the policy context and the regimes that determine prices. We would therefore support the main recommendation of the report that a public consultation exercise should be conducted on the principles of charging for water and wastewater services in Scotland.

I would make some initial observations on the contents of the report as follows:

  • Comparisons with the water industry in England are at best misleading and at worst specious. The structure of the industry in Scotland, the significant technical differences in water provision and our coastline and environment are significantly different. Most importantly regarding charges, we are at a different stage in the investment cycle. I trust that the recent announcements of proposed price increases in England have highlighted this factor to many ill-informed critics of Scottish Water. In addition England does not enjoy a uniform approach to water services, a point that the excessive use of averages and economic models can sometimes hide.
  • We agree with a number of your initial responders that there is a democratic deficit, a point UNISON Scotland made forcibly during the debate over the Water (S) Act. However, it is not quite as wide as some think. Minister's have wide ranging powers under the Act, if they choose to exercise them.
  • In terms of cross subsidy the report probably underplays the role regional cross subsidy played in the creation of Scottish Water. Had it not been for the projected increases in water charges in the North of Scotland, it is highly unlikely that Scottish Water would even have been created.
  • The report does a great service in highlighting the very different application of standing charges in Scotland. Something that was given very little explanation at the time the Strategic Review of Charges was published. It has been a major cause of the headline increases that have caused much of the ill-informed debate around water charges. Similarly, there is a case for an open debate on the issue of separate surface water charges.
  • The report's analysis of charging systems against objectives is an interesting but somewhat academic debate. It is very subjective and I wonder how valuable it is in taking the debate forward.
  • The debate around metered charges is a valuable one and introduces an environmental aspect to the debate often missing in Scotland with our natural abundance of water. However, it does have to be recognised that this is primarily an issue for business users, given the marginal application of metering in the domestic sector. UNISON has serious reservations over the extension of metering on social and health policy grounds, not to mention the economic efficiency of establishing expensive metering systems.
  • A major omission in the report is any discussion of the treatment of debt. I would suggest that this is essential to the question of future charges. Particularly given the WICs views on the application of debt funding to customers between 2006 and 2016. UNISON believes that this could be restructured more efficiently, placing less burden on today's customers for what is a long term investment in Scotland's water and sewerage infrastructure.
  • I would also suggest that any debate over water charges needs to be informed about the need for investment in our crumbling water and sewerage infrastructure. This has not been helped by the loss of large numbers of experienced staff whose expertise will now have to be replaced by expensive private sector provision in a competitive labour market.
  • There is also the question of declining government financial support for the industry in recent years. UNISON recognises that this is not simply a case of asking the Scottish Executive for more support as that would have to be at the expense of other public services. Closely linked to this is the impact of potential changes to the EU internal market rules and the GATS negotiations, not to mention the Executive's response to the Competition Act in the forthcoming bill.
  • In conclusion, I have to say that there is a growing concern that the way water charges have been structured (and the consequent public outcry) together with the treatment of debt and the wider competition environment has been a deliberate strategy to promote the case for privatisation. This view may well be the triumph of conspiracy over incompetence, but it is none the less a strongly held perspective.

I hope the above is helpful and UNISON will be happy to contribute the debate as it unfolds.

Yours sincerely

Dave Watson

Scottish Organiser (Utilities)