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We come to agenda item 2, our final evidence session on the bill. I welcome Nicola Sturgeon back. She is supported by Scottish Government officials Christina Phillips, bill manager with the water industry team; and Stephen Rees from the legal directorate. Do you wish to make a brief opening statement, cabinet secretary?
I will make a very brief one. Thank you for the opportunity to discuss the bill.
We have heard in evidence concern about the extent to which the bill and the hydro nation agenda will benefit customers in Scotland. Specifically, it has been questioned whether any economic gains will be derived from better management of the water resource and, if so, whether those will be passed on to customers in the form of lower bills.
I have read all the oral evidence that has been given to the committee, so I know that you have discussed that issue with witnesses. The bill has the potential to deliver tangible and perhaps more intangible benefits to customers. In the tangible category, in the longer term it would be open to ministers, subject to future ministerial decision making, to utilise or allow to be utilised any profits that derive from Scottish Water’s commercial activities in its non-core business to benefit the customers and consumers of its core business products. That is certainly possible although, as I say, it would be down to decisions of ministers.
At the same time as we are considering the bill, the European Union is consulting on a blueprint to safeguard Europe’s waters. How has the Scottish Government taken account of the developing EU policy and any UK policies that might affect the bill?
The question is important, because the two agendas run to an extent in parallel. You will be aware that the European consultation closed recently. My officials are keeping a close eye on progress as we await the blueprint’s publication.
Have your officials flagged up any inconsistencies that might arise?
We are mindful that there might not be immediate alignment on one issue—metering—but we are pretty comfortable that what we are doing is aligning closely with the principles, the thrust and the objectives of EU developments. We will keep a close eye on that.
The James Hutton Institute and the IHP-HELP centre for water law, policy and science highlight the benefits of linking the bill’s proposals with the land use strategy and wider climate change ambitions. How do you respond to that suggestion? Could such links be beneficial in fostering a more holistic approach to developing Scotland’s water resource?
Yes. We should look to make links between all the areas of our policy. It is absolutely correct that there are obvious links between water policy, planning and climate change. We must understand those links and take a joined-up approach.
We have heard calls from environment and consumer groups for Scottish Water to educate its customers more on water-saving measures. Do you intend to require Scottish Water to undertake such an education campaign?
Scottish Water is already engaged in trial work on that issue. We will discuss with it the evidence that the committee has heard and ensure that it factors that into the work that it has planned or which it might plan for the future.
One of the issues with the bill is what is required to be in legislation as distinct from what the Government can do already or what the Government will progress—as you have just indicated—as part of the wider hydro nation agenda. Can you outline the benefits of the proposals in part 1? Given that the Scottish ministers can already require public bodies to work together and can already require a focus on the development of water resources, what are the benefits of part 1 and which aspects of it are required to be in legislation?
I understand that you are asking specifically about part 1, but my answer applies, to some extent, to different parts of the bill—for example, part 3—as well. The difference is between what can be done just now and what the bill says should be done through the placing of a duty on ministers and, in a later part of the bill, on Scottish Water. It is important that we move from a more permissive approach to clear and explicit duties.
That is helpful. Thank you.
It has come from a lot of groups, and I have been mindful of that as I have read the evidence. However, it is my clear understanding and interpretation of the definition as it is currently drafted that although it indicates the importance of economic value, it does not do so to the detriment of other factors, such as environmental or social benefits. Members will be aware that, separately, ministers are tasked to act in a way that ensures the sustainable use of resources. It is worth bearing that in mind as well. That said, I was struck by the near unanimity of that view and, as we proceed to stage 2, we will certainly give consideration to whether we want to respond to that by lodging amendments.
That is helpful, too, thank you.
I envisage the power of direction being used sparingly. It is hard to isolate individual examples, as we are dealing with a number of organisations that are listed in the bill. We could give a direction for an organisation to ring fence a particular aspect of its activity in order to focus on the issues in the bill, but I do not expect the power to be used overly liberally.
Okay. That is fair enough. A compromise might be consultation with one or possibly all of the designated bodies. I am sure that we will return to that issue in the report and perhaps—who knows?—in amendments.
In relation to the three-year provision, we must recognise that we are talking about a long-term agenda. My judgment would certainly be that, given that it is a long-term agenda, three years is a reasonable period after which to expect a progress report. That is my first answer.
Thank you very much.
We move on to the control of water abstraction.
Water abstraction has become my favourite subject in the bill.
That was not because we did not want to consult; it was simply down to the fact that the part of the bill on abstraction was developed at a relatively late stage of the process. In other words, it was a timing issue. We developed part 2 of the bill after the two consultation exercises had already been undertaken. The abstraction provisions—the substance of which I am sure we will come on to talk about—are about highlighting the value of the resource that we have in Scotland and how we ensure that we safeguard it for the future. I recognise that there was not the same level of consultation on part 2 as there was on other parts of the bill.
A small number of specialist interest groups have suggested that it might be appropriate for the Government to conduct a formal consultation on the abstraction proposals before stage 3. Do you feel that that is necessary, or do you feel that you are doing such work in the interim?
As we are already going through a fairly well-established consultation process, I am not convinced of the need for more formal consultation. We are talking to—and are happy to talk to—any group or stakeholder interest with particular concerns that might want to persuade us to introduce stage 2 amendments, and are happy to continue that open dialogue as we approach stage 2 and move into stage 3. Obviously, the committee’s report will also be important in our considerations.
A number of witnesses have suggested that the policy intention behind the bill’s abstraction provisions is unclear, particularly given that water abstraction is already controlled by the Water Environment (Controlled Activities) (Scotland) Regulations 2011. What will the new system achieve that the current system does not?
A lot, in my view. This is not a criticism, but the fact is that the CAR system is restricted to environmental factors. Members will know this, but it is worth putting on record that the bill does not interfere with that particular process and that people who want to abstract water will still have to go through the CAR process. However, if they go over the threshold that is set in the bill, they will have to go through the additional process. As the bill makes clear, in considering applications ministers will be able to have regard to factors, such as the social and economic value of the activity, the applicant’s financial circumstances and the overall effect of the abstraction, that they are unable to have regard to under the CAR process. Unlike an approach that simply looks at environmental impacts, that kind of approach allows us to take an overall view of the value of the resource and, bearing in mind that value, to make judgments as to whether large-scale abstractions allow us to safeguard that resource properly and appropriately.
Some key stakeholders have expressed concern about activities that have been exempted from the new consent regime for large-scale water abstractions. How did the Government arrive at the list of exemptions in the bill?
Exemptions from the abstraction regime largely cover activities that are for the most part non-consumptive of the water abstracted and which confer wider public benefit, such as Scottish Water’s activities in providing drinking water. I should again point out for the record that Scottish Water’s non-core activities would not be exempt from the regime. On the other hand, the generation of electricity by hydro power, irrigation and so on are considered to fulfil a social benefit as well as being generally non-consumptive of water. Those were the general rules and criteria applied in deciding on the initial list of categories of exemption, which, of course, can be changed at any time if we think it appropriate.
Why did you choose a limit of 10 megalitres a day?
Given that, like you, I have had to learn a lot about this issue in a relatively short time, I should perhaps respond by using a non-technical term: 10 megalitres a day is a lot of water. I also point out that the threshold applies only to future abstractions and not to current ones.
Finally, the new abstraction regime might impose additional costs on businesses. Are you able at this stage to indicate the possible scale of charges for the new regime?
That will be set out in the regulations that we will be required to introduce and on which we will consult properly and listen to stakeholder views before reaching any decision. However, I repeat that we do not expect many to be affected by the abstraction regime. I have just been informed that the estimate is that it might affect five to 10 applications over the next decade, so it is not going to put significant burdens on people who are using water.
Jim Eadie will ask about Scottish Water’s functions.
Witnesses expressed concern that, because of its access to Scottish Government finance and Scottish Water land and facilities, Scottish Water Horizons might be at a competitive advantage to what we might call its commercial rivals. When asked about that, Scottish Water made it very clear that that was not the case, but will you put on record your views on the matter and assure us that that is not happening?
I am very clear, first, that that should not be the case and, secondly, that it is not the case. Scottish Water’s non-core activities operate fairly and on a level playing field. For example, lending to Scottish Water Business Stream happens at a commercial rate that is determined by the economic regulator; similarly, any future lending to any Scottish Water subsidiary would also take place at a commercial rate. That is very important for state aid reasons, which I know is another issue that has been raised with the committee. We expect Scottish Water to earn a fair economic return from all its non-core commercial activities. I do not believe that it is able to operate at an unfair advantage, and nor should it be.
Thank you for that.
On the first part of your question, I cannot say much more than I said earlier. It might be a possibility in the future, but the question whether non-core profits could be used for the benefit of consumers of core services would be subject to ministerial decision making.
So Scottish Water Horizons would have to take the hit on any loss it made in its non-core services.
Yes, and it would not impact on its core business.
That is helpful.
The bill states that all lending has to be within limits that are set in budgets, so there is an upper limit that will apply year on year.
Part 4 of the bill concerns raw water quality. The centre for water law argues that it would be better if the Scottish Environment Protection Agency, rather than Scottish Water, took on the new powers regarding raw water quality as it is already involved in raw water quality monitoring. Why do you consider Scottish Water to be the appropriate organisation to take on the new powers?
My answer will be similar to the answer that I gave Alex Johnstone earlier about why we have put the abstraction regime in the bill instead of just relying on the CAR process. There is an overlap between the organisations’ roles, but the issue comes back to the difference between SEPA’s narrow focus on the environment versus the broader focus that Scottish Water is able to take through the provisions in the bill.
You have suggested that there is an overlap between SEPA and Scottish Water with regard to the water monitoring network, but the centre for water law suggests that the existing SEPA network is being reduced. How do you foresee that working out in the future?
It is important that everyone who is working in this area—Scottish Water, SEPA, farmers, organisations such as RSPB Scotland and others who have an interest in ensuring that the work is carried out properly—continue to work together in a joined-up and complementary way. There are opportunities—not specifically in the bill but through what we are doing in the bill—to ensure that that kind of partnership working works even better than it does already.
Scottish Water indicated in evidence that it already works in partnership with other statutory bodies and land managers to protect raw water quality. What do the provisions in part 4 provide that cannot be achieved on a voluntary basis?
I think that—as I believe Scottish Water said in evidence—partnership working will continue to operate on a voluntary basis and that the powers that are being given in this part of the bill would need to be used only in extremis and in rare circumstances. However, we all know that, in the real world, those voluntary partnerships do not always work as effectively as we would want them to. In those circumstances and given the importance of the quality of raw water, it is important that Scottish Water has the power to do what is envisaged in the bill. It is not intended that the powers will become the default way of operation. They will be used sparingly, as a last resort. The partnership approach will continue to be the preferred approach, but the provisions in the bill give Scottish Water the backstop powers that it is appropriate for it to have.
In relation to the new power of entry and inspection, the UK Environmental Law Association was concerned that the term “premises” was unclear and asked whether it included land and buildings or just buildings. Can you provide a clear definition of “premises”?
It does not include houses—that is the easy bit of the answer. It is envisaged that it includes land and buildings. However, given that concern about a potential lack of clarity in the bill, I am happy to go away and look at whether we need to make any changes at stage 2 just to put matters beyond doubt.
Finally, the committee has heard concerns that allowing Scottish Water to enter into agreements with owners or occupiers of land to undertake works to prevent the deterioration of water quality may result in land managers being subsidised to comply with the law. In fact, in its written evidence the Scotch Whisky Association asked for safeguards to be put in place to ensure that landowners are not being paid to comply with the law—for example, in the construction of slurry storage. What assurances can you give that such a situation will not arise?
It is certainly not the intention to do that. As I said in response to previous questions, I am happy to see whether we need to do more to clarify that in the bill. This is a point that I will no doubt also make on the section on the sewerage network: it is not the intention to remove the responsibility of private owners of land or of septic tanks, which later sections of the bill deal with; it is very much about encouraging owners to take responsibility and to fulfil their responsibilities.
We move on to non-domestic services.
We have not had much by way of comment on part 5 of the bill, but Consumer Focus Scotland raised concerns about the system of deemed contracts and particularly highlighted concerns about experiences of such systems in the energy industry. What assurances can you give us that such concerns will not arise in the water industry?
I read Consumer Focus Scotland’s evidence. I would be keen to understand a bit more about what lies behind its concerns, as I am sure the WICS would be, because I think that the bill’s provision is a commonsense and important one. I have constituency experience, as I am sure others around the table have, of the problems that arise when there is no clarity about the contract between who supplies the water and who benefits from the supply. Such circumstances can arise regularly if water providers are changing. I therefore believe it to be a commonsense proposal to put in place the deemed arrangements if no arrangement exists. The WICS obviously has a part to play in the detail of that scheme. However, I would be happy to have a discussion with Consumer Focus Scotland to ensure that we fully understand its concerns and that we take whatever steps are necessary in the remainder of the bill process or in the work that will have to be done after the bill is enacted.
I have had difficulties with my constituency office in that regard, but we will not go into that.
I am not sure that any legislative system in any area where people get billed and are required to pay will deal with every instance of bad payers. There will always be a small number of people who do not pay or do not pay on time and who create issues in that way. By putting the onus on the landlord to notify the licensed provider when there is a change of occupancy, the bill will make it harder for people to hide behind a lack of knowledge about who should pay and whom they should pay, just because the information has not been made clear. The bill will help in that regard, but whether it will completely solve the problem is another question.
Margaret McCulloch has questions on the sewerage network.
Witnesses universally supported the proposals relating to passing pollutants and fat into the sewer network. However, several stakeholders have recommended that the list of premises that are to be inspected by Scottish Water and SEPA could be expanded from trade premises to include places such as schools and hospitals. Could that be revised?
It is certainly possible to revise it. I will not give a commitment today to expand the list, because careful consideration must be given to the types of organisations and bodies that it is appropriate for the bill to cover. However, I am happy to consider any specific suggestions that have been made as we go through the next part of the process.
Issues have been raised about septic tanks. The provisions relating to the maintenance and repair of septic tanks could have implications for less well-off people who are connected to communal septic tanks, who might have to pay for repairs that they cannot afford. How will people be protected from being landed with substantial bills for septic tank repairs?
The bill does not put obligations on people who do not already have them. It makes it easier for the repair or maintenance of a septic tank to go ahead even when somebody who has part-ownership is not prepared to sign up to that. That is a bit like the way in which individuals who live in tenements are responsible for the maintenance of their property. Nobody who currently does not have responsibility for the maintenance of a septic tank will be given that responsibility under the bill. The bill simply makes it easier to get repairs done even when not everybody signs up in advance. Again, that is a commonsense proposal.
We have heard from witnesses on that issue. The concern is that, for example, four households could share a tank that is broken, but only one person might be prepared to get the repair done. It would then be up to that individual to get the repair done, pay for it and, if the other three owners do not agree to pay, take them to court to recoup the money and so incur court costs. That is a concern. Could you take those issues into consideration?
Sure, but in a sense that is what the bill tries to do. It aims to enable one owner to comply with their statutory duties by getting repairs or maintenance done even when co-owners are not prepared to do that. I accept that that creates the scenario that you have talked about, but the only alternative to that is the current situation in which, because not every owner signs up in advance, a repair cannot be done. That is the problem with the current system.
Finally, we turn to water shortage orders. How often do you expect those orders to be used? Might their use increase in the future given the growing number of extreme weather conditions?
I am not sure that my ability to see into the future is quite as well developed as that.
It has been suggested that a water shortage order might have serious implications for vulnerable groups and for businesses that are dependent on water. What protection does the bill offer to those groups?
If such an order was introduced, Scottish Water would have obligations to ensure that vulnerable people were catered for, as is the case just now if there are water shortages in an area. I think that the way in which Scottish Water currently operates covers that point, but I am happy to look at the drafting of the bill on that, as with other aspects, to see whether that point might be made clearer.
And what about businesses?
In what context?
For example, I think that the Scotch Whisky Association, whose representative I recognise in the public gallery today, might have some concerns about water shortage orders.
We will be happy to talk to the Scotch Whisky Association about any concerns on the use of water shortage orders as well as about abstractions, which we considered earlier. We will need to ensure that, where the orders are used, the vulnerabilities and interests of individuals and businesses are properly catered for.
If members have no further questions, that concludes our evidence at stage 1 of the Water Resources (Scotland) Bill. We will consider our draft report at a meeting in the very near future. I thank the cabinet secretary and her officials for their evidence this morning. I will briefly suspend the meeting to allow them to leave the room.
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