Briefing...

WATER SERVICES BILL CONSULTATION

INTRODUCTION

The Scottish Executive have issued a further consultation paper which describes the developments that make the forthcoming Water Services Bill necessary and the provisions proposed for that Bill. This briefing outlines the main issues covered by the consultation paper and UNISON's initial concerns. (See also Future of the Water Industry)

SUMMARY

The Executive's proposals claim to have two objectives:

(i) to ensure competition works in the interests of all customers and does not undermine arrangements to protect public health, the environment and the Executive's social objectives.

(ii) to foster a sustainable public sector industry which is able to compete on equal terms with other suppliers and which customers actually choose to use.

The Executive have rejected the option of seeking an exclusion from the provisions of the Competition Act 1998. The reasons are primarily political in that the Executive supports the principle of competition, believing that it will deliver benefits to customers.

The Bill will establish a single water authority called Scottish Water. It will manage an investment programme in the order of £2billion which implies the Executive's support for the central option in the Water Quality and Standards consultation paper. It assumes efficiency savings of up to £168million by 2005/06. This increase from the Water Industry Commissioner's (WIC) £134million cuts is presumably predicated on the additional efficiency savings from the creation of a single authority. The paper then sets out the arguments for and against a single authority, concluding that disruption can be minimised through a short transition period and local responsiveness can be improved by strengthening Water Consultative Committees. The new authority will have more Executive Directors and will "become the employer of their current workforces who will transfer to it". There is no detail as to how the staffing issues are to be dealt with.

The Bill will give Scottish Water a general power to pursue commercial opportunities subject to ministerial direction and guidance. This will include freedom to enter into PPP/PFI schemes and new powers to make agreements with third parties, including the laying of water mains and servicing pipes. In essence, Scottish Water will be responsible for the infrastructure allowing it to service the systems through ventures with third parties.

The licensing regime will become the responsibility of the WIC including "promoting the interests of all customers, whether of an authority or a new entrant". There will be a new Drinking Water Quality Regulator, and new entrants will be subject to criminal prosecution if they supply water unfit for human consumption. Scottish Water will be the supplier of last resort for domestic purposes and they will have powers to deal with unlawful connections and require developers to meet the cost of laying sewers and mains to service a new development.

New entrants will have to have sufficient financial strength and technical competence and charges will include "a proper and reasonable contribution towards the maintenance of the public system as a whole." Charging policies will include the geographical averaging of charges to ensure accessibility and affordability of services in rural areas and continue the use of council tax banding as a basis for domestic charging.

INITIAL UNISON CONCERNS

1. The policy basis for the Water Services Bill is that the Executive " cannot and should not control" the market and that competition should be encouraged. UNISON rejects that view. There is no evidence in this paper or elsewhere to support the contention that competition delivers "efficiency, innovation and improved services without compromising drinking water quality, social or environmental objectives". Experience in other utilities demonstrates that the opposite is true.

2. The paper claims to be establishing a "public sector industry". However, the provisions if enacted will result in a public shell, overseeing a largely privatised industry.

3. UNISON still has serious reservations over the establishment of a single national water authority. However, if it is to be established there needs to be greater clarity over its mission, structure and role. The paper is silent on these issues.

4. The proposed licensing machinery appears to be inadequate to "safeguard the Executive's public health, environmental protection and social policy objectives". In particular, giving the WIC a general role to promote the interests of new entrants means he will have to promote competition. In other utilities, this has been to the detriment of the Scottish economy and consumers, through the introduction of expensive and bureaucratic systems.

5. The case against exclusions under the Competition Act is extremely weak and the options are inadequately explained in the paper. The Executive appears to have entirely swallowed the outdated Tory competition mantra. UNISON believes that the provisions of Schedule 3 (7) remain a sound basis for an exclusion under the Competition Act.

6. There is little detail of the financial framework for the new authority including the necessary debt write off. The dangerous ‘efficiency' cuts have been increased to £168million. This is likely to result in job losses of around 2500 mostly experienced staff. On the basis of experience in the gas and rail industries this could fatally undermine safety and customer service.

7. While some of the commercial freedoms are appropriate, others, including authority to allow third parties to lay and maintain water pipes, highlights a hidden agenda behind the proposals in this paper. An authority in which the vertical integrated nature of the industry will be replaced by an enabling authority with most services provided by the private sector.

8. This is the third Scottish Executive consultation paper with significant consequences for staff working in the water industry. However, for the third time in succession this paper makes virtually no reference to the staffing consequences of the proposals. It would appear that the Executive is blind to the legitimate concerns of staff who have to actually deliver this vital public service.

Dave Watson
UNISON Scottish Organiser (Utilities)
5 April 2001
d.watson@unison.co.uk