Official Report 403KB pdf
I welcome everyone back to public session following the committee’s discussion with the budget adviser on the themes for our scrutiny of the draft budget 2013-14.
Thank you convener, and good morning to the witnesses. I thank you all for coming to the committee this morning.
Certainly, and thank you for allowing us to come to the committee this morning.
Will you describe the level and nature of the consultation that took place prior to the publication of the bill?
As is reported in the policy memorandum and other documents, there were two formal consultations on the development of this agenda. The most recent was in February this year. It set out a more detailed conception of a number of the activities under the hydro nation agenda, and it presented some of the draft sections. The outcome of that consultation is summarised in the policy memorandum.
You have touched on some of the issues that were raised by respondents. Could you tell us about any other key issues that were raised and state how they were addressed in the bill?
One significant comment concerned the definition of value as it is expressed in the bill and whether that is simply about economic and financial value. There was a concern on the part of those who are engaged in environmental activities that such an interpretation of the concept of value would be unnecessarily narrow and might compromise other objectives.
Thank you for that detailed response.
Consumer Focus Scotland has told the committee that the benefits of the proposals in the bill to consumers are unclear. How will consumers actually benefit from the proposals?
The first point is to ensure that consumers are not disbenefited or are not exposed to undue risks as a result of Scottish Water going into other areas. A provision in the bill, and ministers’ general instructions to Scottish Water, will achieve that.
The committee has heard concerns that the duty that is placed on the Scottish ministers in section 1 focuses too much on developing water resources for economic purposes and does not include sufficient mention of environmental and social factors. Will you respond to those concerns?
I tried to address that in responding to Aileen McLeod earlier, and I am not sure that I can add to that. To some extent, it is a legal issue about how we describe value. Ministers will declare that their conception of value goes wider than financial value and they will look to secure, through the various activities that they stimulate and facilitate in the agenda, things that are of environmental and social benefit. Stephen Rees might want to comment on the legal aspect of that.
Section 1 provides that ministers are to take steps to ensure the development of the value of Scotland’s water resources in ways that are sustainable, and value is defined as “economic and other benefit”, which clearly encompasses social and environmental concerns. The words “environmental” and “social” do not appear in the definition of value, and we could argue about whether those words should appear from a presentational perspective, but the legal effect is clear that value encompasses a broader range of things than purely economic value.
Does the bill provide that Scottish Water is accountable for adhering to the laws on pollution? An article in The Herald at the weekend stated that, for two years, a number of sewage works and plants and the organic recycling facility at Cumbernauld have been repeat offenders. Is there anything in the bill that will make Scottish Water accountable and ensure that that stops?
No, that is not the subject of the bill. Those activities are already subject to close control by SEPA and are all subject to what are known as CAR—controlled activities regulations—licences under the Water Environment and Water Services (Scotland) Act 2003.
We will get into that detail next week when SEPA comes to give evidence.
Who owns Scotland’s water?
Do you want the short answer or the long answer?
I can try to answer.
Stephen is itching to answer, but he will have to be very itchy for a moment as I will put the ball in play.
The position is not entirely clear. As Bob Irvine alluded to, it varies depending on the circumstances. Very broadly, running water is generally not owned but is, as Bob said, subject to rights that prevent people from doing anything that detrimentally affects the water that flows past those people downstream of them.
Can it be regarded as a public good?
In a sense, the reason why much of the water in the water environment in its natural state is not owned is that it is seen as something that is common to all and for the benefit of all. Therefore, it cannot be appropriated by one person, unless they extract it in a container and take it away.
I ask those questions because of the definition of value. How we develop the value of Scotland’s water resources is at the core of the bill’s purpose. That value is not, of course, just for this generation; it is for future generations as well.
I would certainly encourage you to do that.
The bill provides that the value of water resources
We are taking evidence from the centre for water law, policy and science on 24 October, and we will also visit it in Dundee, probably on 25 September.
Excellent.
Obviously, we can return to those issues then.
Directions are used sparingly by ministers, but they are used if it is necessary to define a very specific set of activities or purposes for an agency or body. The point of putting the power in the bill is to confirm ministers’ seriousness of purpose and their serious wish to have a high level of engagement with those bodies.
Nothing in the bill suggests that those directions would be consulted on prior to being made. Why has that consultation stage been omitted?
I am not sure that that is correct. I think that section 3—[Interruption.]
We will consider the issue that you raise. We noticed that a few responses to the call for evidence raised the point that some form of consultation would be desirable.
Part 2 of the bill concerns control of water abstraction. Why was it felt unnecessary to have a formal consultation on the abstraction proposals?
I do not think that it was felt to be unnecessary—it was just that the timescale within which the need for the provision was identified made having a consultation difficult. We engaged with key stakeholders prior to its being developed. From that point of view, it did not come out of the blue. The real answer to the question is that the timetable was against us.
Do you feel that you reached the right stakeholders and that the quality of the interaction was appropriate?
I hope that we did. The committee has received additional comments on the provision, and we will consider them carefully. We are interested to hear whether the people from whom the committee will hear in the coming weeks feel that we have that provision in the right space.
How do the proposed control of water abstraction provisions complement the existing regime under the controlled activities regulations, and why is a new authorisation scheme required for the very large abstractions?
The CAR authorisation that is granted by SEPA is narrowly focused on the environmental aspects of any application. “Narrowly” is not quite the right word, but those are the only aspects that SEPA can take into account in awarding an authorisation.
You have given quite a lot of context for why the provisions are there, but why was the 10 megalitre limit decided on?
That was set following discussion with SEPA in particular, on the basis of the range of abstractions that take place. Few existing abstractions are above 10 megalitres; such abstractions are exceptional. If a new one came to Scotland, it would be exceptional. The level might not be right for all time, so the opportunity to vary it exists, but given the exceptional nature of larger abstractions, ministers feel that the size is credible to allow the provision to begin its life.
The submissions that we have received have raised a couple of issues, one of which relates to the abstraction limit. How do you react to the suggestion that the limit should be based on the level of consumption rather than abstraction?
We want to look at what people mean by defining the limit through consumption. The exceptions that are given in the bill imply that we are talking about an abstraction that is actually an abstraction and does not involve taking water then spraying it back in. The exemptions provide a way of confirming that. If there is a way of defining a consumptive abstraction beyond that, we would want to look at that. We wish to engage with the representations that have been made on that point in response to the committee’s request for evidence, to see whether there is a better way of dealing with the issue.
Our friends in the Scotch whisky industry would like to be exempted from the abstraction consent regime. What are your views on that request?
Again, we want to discuss with the industry exactly why it feels that. Ministers will, of course, always endorse the value to the Scottish economy of the whisky industry and the importance of the water environment to that industry. Ministers may wish to accede to that request but, before they do so, we need to engage with the industry and discuss exactly why it feels that it should be entitled to such an exemption.
To follow up on the exemptions, you mentioned the possible development of bulk sales of water, which I think you called commodity trading. Is there anything in the bill that will allow Scottish Water to undertake bulk sales without the say-so of ministers, or is something built into the bill to ensure that that does not happen?
If Scottish Water wished to do that, that would be outside its core functions, so the abstraction provision would apply if the abstraction was above the threshold. Other than that and the existing governance arrangements for Scottish Water, through which ministers in effect approve the business plans—that would be a pretty significant activity and would therefore probably be included in the business plan—there is nothing specific in the bill that relates to that activity for Scottish Water.
So, under the new exemption regime, the Scottish ministers would have control of any bulk sale in which water was taken out of Scotland.
Yes.
We move on to Scottish Water’s functions.
Can you explain why the provisions in part 3 are necessary when Scottish Water already successfully provides non-core functions through Scottish Water Horizons?
Those provisions are largely for clarification. Stephen Rees might want to comment on that.
I am sorry—could you repeat the question, Mr Chisholm?
The question is about the non-core function work that Scottish Water Horizons already does. Some people are questioning why the provisions are necessary.
Under the existing legislative framework, Scottish Water can engage in activities that are outwith its core functions, provided that that does not compromise its core functions. The purpose of part 3 is to go slightly further than that and to place a proactive obligation on Scottish Water to engage in renewable energy and to use its assets. There will be a slight shift from having the ability to do that to having a proactive obligation to do it.
To an extent, you have answered my next question in answering Margaret McCulloch’s general question on the issue, but this is specifically about part 3. Will you explain how the provisions in part 3 promote the interests of Scottish Water’s customers?
I am not sure that I have anything to add to what I said. I can repeat that, and I will perhaps be a bit more successful in summarising the points.
The question relates specifically to part 3, but if you feel that you have already answered it, that is fine.
The most important bit for customers is section 24, which tightens the distinction between core and non-core functions, which has implications for charging of customers.
How do you respond to concerns that the proposals in the bill will have a negative impact on private sector providers of services, because it will enable Scottish Water to invest in services such as waste management? Concerns have been raised about that by some private sector providers.
As I said earlier, it is ministers’ expectation that Scottish Water will engage in those activities on properly commercial terms. If ministers need to make that more explicit in anything that they communicate to Scottish Water or report elsewhere, they will do that. At the moment, though, Scottish Water’s activities are not compromising or causing concerns in that area. It is a welcome participant, particularly in waste management; indeed, it is leading and stimulating that market. It may have different roles at different times, as those markets develop. However, as I said before, it is not ministers’ intention to subsidise Scottish Water, or for customers to subsidise Scottish Water to engage in markets in which it should be operating on properly commercial terms.
Some of those concerns may have arisen because of ministers’ power to lend to Scottish Water at any rate that ministers choose. In practice, however, ministers would ensure that if they were lending for non-core activities, they would do so at a commercial rate so as to comply with European Union state-aid competition law. Although those concerns are not explicitly addressed in the bill, ministers have to comply with European law when lending to Scottish Water.
Okay. I understand that.
The evidence is rather contingent, is it not? To the extent that Scottish Water is successful in other areas, it will add to Scottish gross domestic product and raise Scotland’s profile and influence, which will be to the benefit of Scotland and, potentially, Scotland’s customers. Part of the ambition of the hydro nation agenda is to increase the value of the sector to Scotland. It is a sector that is growing in many areas. As we said before, the management of water services is crucial in many developing areas, particularly as populations urbanise. If Scottish Water can contribute to that, and use its expertise and skills, and the skills and expertise that are in our engineering consultancies and many of our academic environments, that will be a significant potential gain for the Scottish economy.
We have received evidence criticising Scottish Water in relation to its partnerships with private sector providers. Notably, those submissions argue that by not encouraging Scottish research and development or allowing Scottish expertise to build up, and by going outwith Scotland for research and development and so on, Scottish Water’s activities have impacted negatively on the Scottish economy.
The bill touches on neither of those issues directly. Scottish Water’s charges are regulated according to the statutory framework. There is a clear obligation from the regulator to give the lowest reasonable cost to customers. I imagine that the committee will want to interview the Water Industry Commission. It is my view that Mr and Mrs Cuthbert’s concern about the regulatory framework and the regulated asset base does not really apply in Scotland in the terms that they suggest. Scottish Water and the WIC will be able to give you a more detailed response to that.
Thank you for that. It is something that we can pursue, and there will be a bit of overlap with other work that we are doing on public procurement.
That would be very helpful.
The bill allows Scottish Water to enter into agreements with owners or occupiers of land with a view to taking action to prevent the deterioration of raw water quality or removing and reducing the need to treat that water. The written evidence that we have received from Scottish Land and Estates argues that Scottish Water should work in partnership with landowners. Why does Scottish Water need powers of entry and inspection when it could work in partnership with landowners?
Scottish Water’s objective would always be to work in partnership but, for whatever reason, a partnership might not be effective or something might happen in the short term, such as a pollutant activity on a premises that causes a dispute about its origins. The power of entry and inspection is a reserved power. There is no intention to turn Scottish Water into a Stalinist organisation that knocks down farmers’ doors at midnight, but the power is reserved.
Are you basically saying that the powers would be used only in the case of emergency when Scottish Water has to get on the ground quickly to resolve a problem?
Absolutely. It might help the committee to ask Scottish Water and SEPA—because it is also part of the picture—and the drinking water quality regulator for Scotland about how the partnership approach with landowners is developing and in what circumstances, that they have experienced recently, Scottish Water might want to use the powers.
It has been argued that SEPA is better placed than Scottish Water to carry out monitoring of raw water quality and that if further monitoring is required, SEPA should have additional resources. Can you explain why the proposed new powers are being given to Scottish Water?
It is Scottish Water’s responsibility to provide clean, fresh drinking water to standard, so it should have the incentive to seek the least-cost way of doing that. If the least-cost way of doing it is to engage with a landowner, or landowners in a catchment area collectively, and say, “You can do your business in a different way, which means that the pollutant will not come into the system, so that we will not have to invest in machinery, energy and so on to take it out,” it is best for Scottish Water to have the incentive to do that. SEPA is a passive monitoring and enforcement agency. A different set of relationships is being stimulated through the provision.
What impact do you hope the proposals in part 5 will have on licensed providers and their customers?
The impact should just be to clarify the arrangements, because there may well currently be doubt about whether a provider can legitimately charge a new customer in those circumstances.
We will move on to the sewerage network. The committee received evidence from several witnesses calling for the proposed powers relating to maintenance of septic tanks to be strengthened to allow Scottish Water to take unilateral action and to require replacement of out-of-date equipment. How do you respond to those calls?
That provision is one part of a much broader exercise that is under way between Scottish Water and SEPA to find out whether many septic tanks are not registered. We would be happy to share with the committee other pieces of work that address maintenance of septic tanks, what is happening with them and the broader picture of their management.
Has registration of septic tanks not been working satisfactorily?
It has worked, but it is still under way. Septic tanks are being identified and registered during the conveyancing process. Turnover of properties might not happen as quickly as we would like in rural areas so there remains a big piece of work with regard to septic tanks.
I am someone who falls within that category. We have all received lots of correspondence and we know that if we want to sell our homes we must have a piece of paper to say that the septic tank has been licensed. Are you saying that that has not really worked and that there still remain lots of septic tanks to be licensed or registered?
We know that there are still some that need to be registered and located. Some owners are not contactable or cannot be traced. That is a wider piece of on-going work. Our policy document demonstrates the different actions that are being taken in an attempt to address the issue. I know that the septic tank issue is of particular concern to rural communities.
Some tanks might be still perfectly efficient, but may be old concrete tanks rather than plastic tanks. I have visions of Scottish Water saying to owners that they must replace out-of-date septic tanks. Scottish Water does not even bother because it is too difficult for them to empty some of these tanks. Could it ask a householder who has a concrete tank to replace it on the ground that they do not know whether it is working efficiently?
No. We are not stepping on people’s rights and responsibilities to maintain and upkeep their septic tanks. SEPA becomes involved if a septic tank is having an impact on the environment. We are certainly not planning any draconian measures to insist that everyone must update to new tanks immediately.
The provisions are about empowering owners of communal tanks to take action where perhaps one or two owners are a bit more reluctant to take steps. It is a case of empowering one or several of the common owners to take action to maintain their tank in its current form but to the correct standard and according to the correct procedures in order to avoid discharging inappropriate matter into the environment. So long as the basic requirements on discharge from the tank are met, in accordance with the licence or registration under the control of activities regulations, there is no need to upgrade the type of tank so long as it is maintained to the required standards.
Thank you. Finally, Aileen McLeod wishes to ask some questions about water shortage orders.
The committee has received evidence highlighting concerns from domestic customers and major water users such as the Scotch whisky industry about the potential impact of water shortage orders. How often would you expect such orders to be used?
A weather forecast is involved.
Incredibly, neither ministers nor Scottish Water actually control the weather. I do not think anyone can control the weather.
What about the impact of any restrictions? How will they be assessed when orders are in force?
That will be part of the extended communication between Scottish Water and customers. Knowing where the dialysis patients and the special needs are, and knowing the particular circumstances of industrial or commercial premises and how time sensitive they are to having the water on or off, if that is part of the regime, will be parts of it. Those things do not happen arbitrarily. The point of the statutory framework is to set up a communications and planning framework that will manage such issues.
There are no further questions. Thank you very much for the evidence that you have given today. It is very helpful to set the framework for the bill.