Infrastructure and Capital Investment Committee

Meeting date: Wednesday, October 24, 2012

Official Report 494KB pdf

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Water Resources (Scotland) Bill: Stage 1

Item 2 is evidence taking for the committee’s stage 1 consideration of the Water Resources (Scotland) Bill from energy and environmental organisations. I welcome to the meeting Dr Sarah Hendry, lecturer in law at the international hydrological programme—hydrology for the environment, life and policy, or IHP-HELP, centre for water law, policy and science, which some of us visited a couple of weeks ago; Adrian Johnston, technical director at MWH, who is representing the Institution of Civil Engineers Scotland; Marc Stutter, head of research: catchments and coasts at the James Hutton Institute; and Ian Cowan, co-convener of the water sub-group in the UK Environmental Law Association. I thank the witnesses for their written submissions and invite Margaret McCulloch to begin the questioning.

What is your view of the Government’s overall ambition for Scotland to become a hydro nation? Does the bill go some way towards achieving that?

Our centre is very supportive of the Government’s decision to focus policy agendas on water. We are very keen to work with the Government and others on taking the hydro nation concept forward and certainly think that part 1 of the bill is an attempt to give some legislative expression to the ideas underpinning it.

I second that. As an academic research institution that is tied up with Scotland’s water environment, the James Hutton Institute recognises that this is an important step in firming up some of the hydro nation agenda. Scotland certainly has the ability to sell some of its water expertise under the hydro nation badge and the protection of the economic, societal and environmental benefits in the bill will add to those efforts. It would have been nice to have seen closer links between those elements; after all, the economic relies on the societal, which in turn relies on the environmental, and the bill could have wrapped those things a bit more tightly for important economic and revenue-creating sectors in Scotland such as food and drink, land management, tourism and energy.

The Institution of Civil Engineers Scotland very much agrees. We very much welcome the bill and the part that it will play in pushing forward the hydro nation agenda, although we recognise that it forms only part of that agenda. The bill and the overall agenda will very much help Scotland to maximise the benefits of what it is already good at doing in the water sector; to continue to build capability in addressing complex sustainable water management issues; and to further increase Scotland’s competitiveness on the world stage in this area.

UKELA supports the hydro nation agenda and the intention to make the most of Scotland’s water resources and undoubted expertise in water matters. However, we are concerned about certain aspects of the bill.

How adequate was the consultation that took place prior to the bill’s introduction? Are you satisfied with the Scottish Government’s response to any concerns that you raised during the consultation phase?

The consultation was generally good. There were two Government consultations, the second of which ran, I have to say, for a shorter period than we would usually expect. The bill team and officials who were working on the hydro nation agenda and the bill were really helpful and were happy to attend meetings that we organised on hydro nation and the bill. The only thing I would say is that, when the bill was published, part 2 came as a surprise to many of us.

The background to the overall hydro nation agenda has been quite good, with public meetings, discussions with the academic and water industry sectors and so on. However, I was more involved in submitting written evidence on specific wording in the bill, which is what we are discussing today, rather than with previous meetings.

Similarly, I was not involved to a great degree in the consultation stage but, certainly, in the preparation of the written evidence and the discussions that we have had, we have found it to be a useful process.

I have nothing to add to what Sarah Hendry has said.

The committee has heard evidence, mainly from Consumer Focus Scotland, that a recent European Commission consultation on the blueprint to safeguard Europe’s waters might have implications for the development of Scotland’s water resources and for the bill. What is your view on that? Are you satisfied that the bill takes account of the drive at European level in relation to developing water resources?

We need to wait and see what the output of the blueprint consultation is. It has been a wide-ranging exercise and I understand that it will feed into a great deal of future work that the Commission will undertake on the issue of water in the medium term.

In the short term, I do not think that anything in the bill will cause a problem with regard to the blueprint. One issue that might arise from the exercise is water efficiency in buildings. The bill does not directly deal with that, but it certainly is not in conflict with that kind of policy step.

From my knowledge of the EU proposals going into the blueprint, I believe that some of the pillars involve the water quantity and quality aspects and that there is a desire to unite those with other key areas of policy such as habitat, societal benefits from water recreation and wellbeing. The industrial side is important, too. The fact that those policies act in isolation seems to prevent benefits from being realised in the water sector at times and might create conflicts between, for example, dredging under the controlled activity regulations and achieving flood management, or regulations around, say, a new technique for removing waste from sewage that is going into a water stream and regulations about where that sewage should be directed. Various policy trade-offs need to be considered, and there is an opportunity for the bill to start to unite those policies so that those clashes and trade-offs do not impede some of the more visionary stuff that it is trying to put in place.

Building on that aspect, we think that the hydro nation agenda will need to pursue the best possible collaboration between various institutions and groups across Scotland to ensure that we have a truly integrated approach to the management of Scotland’s water and how we talk to the rest of the world about that. The issue of collaboration and understanding how institutions can act in an efficient way, avoiding duplication and so on, is important.

UKELA has emphasised the need for the bill to recognise that water has inherent value on its own, in its place in the water environment. The European water framework directive recognises this by stating:

“Water is not a commercial product like any other but, rather, a heritage which must be protected, defended and treated as such.”

Sticking with the European theme, I have a question that I do not know whether you can answer. Are you aware of any other European countries that are carrying forward similar or parallel legislation with the aim of protecting water resources? Are you aware of any other water policies that are being legislated for by other European countries?

As far as I know, no one else is thinking about a hydro nation agenda in that broad and focused sense—the hydro nation agenda is broad, and the Government is focused on it. Almost all European countries have made substantial changes to their water law and accompanying policy in recent years in order to implement the framework directive and the other EU water legislation that has come along with it, and that will probably continue. They have all been doing that, but not with the same hydro nation focus.

Let us turn our attention to England and Wales rather than the whole of Europe. Other witnesses, including Consumer Focus Scotland and SSE, referred to the opening up to competition of the non-domestic water and sewerage market in England and Wales, and there was some discussion of the possible impact of that. How might that impact on the proposals in the bill, and how does the bill anticipate such changes?

There will be opportunities for Business Stream in the opening up of the market in England and Wales. There will be opportunities for companies in Scotland to take up the new challenge of a more open market south of the border, and the bill clarifies a number of issues relating to Scottish Water and the subsidiary companies, which will be helpful to that process.

The English bill is at an early stage, and what will happen in England is not wholly clear. It would be nice to think that those working in the water services sector in England are fully up to speed on all the interesting things that have already been done in Scotland to open up the retail market and that they are taking the fullest advice from the Water Industry Commission for Scotland, in particular, about our experiences here.

What has been happening in Scotland is working well, and Scotland can see itself as an exemplar for how that could be progressed in the wider United Kingdom. Overall, however, on the issue of the horizontal layering of the different aspects of water supply and delivery, Scotland needs to—sorry, I will stop there. I will come back to that.

I do not really have anything to add, I am afraid. I cannot help you there.

Do not worry—we can come back to that.

Mr Cowan has touched on the issue of the value of Scotland’s water resource. There has been some criticism that the definition of value in the bill is too narrowly focused and is too much to do with the exploitation of the resource as an economic asset. How would you like the bill to be reshaped by the type of definition that you are looking for? Would other proposals flow from a redefinition?

As I said, the first thing that UKELA would like to see is an explicit recognition that water has an inherent value that is not economic but is a wider social and environmental value. The definition of value in the bill includes the phrase “economic and other benefit” and the responses to date have said that the environmental and social aspects are covered by that, but we still feel that the dominant drive is economic. In promoting such a wide agenda as the hydro nation agenda, it is difficult to find the right words to express in legislation what you are trying to do. It occurred to UKELA that legislation might not be the way to address the hydro nation agenda and that there may be other ways of doing it.

Now that a legislative approach has been opted for, it is important that the bill is explicit about the other values that need to be stated to make it clear to anyone reading it that it is not just about development. The words “development” and “value” have connotations, and the word “resource” could be viewed as quite an anthropocentric concept. In all those terms, there is a risk that economic values might be predominant. Rather than saying “economic and other benefit”, we think that it is important explicitly to say “economic, social and environmental benefits”.

11:45

I am curious to know other witnesses’ take on that. Would it make any significant difference to the proposals in the bill if we altered the definition along the lines suggested by Mr Cowan?

It is a fascinating area. I see the bill as paving the way for lots of future developments by setting out the groundwork for those developments. It already does that—justifiably so—on handling effluents, waste and water abstraction, drought orders and things like that, but you could extend that further so that water can be seen as a test case for the important concept of ecosystem services, which is gaining steam throughout Europe. It is a nice way of uniting the positive and negative aspects of water, and putting the things that are put into water and the things that are taken out of it on a level playing field. If you were to take the ecosystem services approach in the bill, you could bring together the economic, societal and environmental benefits and pave the way for the use of some nice tools, such as payments for ecosystem services.

I look forward to your draft amendments.

I have a number of thoughts about section 1. On the amended provision about sustainable use, our centre feels that “sustainable use” is a better term than what was there before, although we still feel that “designed to contribute to” is quite weak.

I agree with Ian Cowan that, at a minimum, the terms “social” and “environmental” should be included in section 1(3), instead of just “other”. We understand that the principal locus for defending the water environment is the Water Environment and Water Services (Scotland) Act 2003. Nonetheless, the focus on development, while important, needs to be balanced.

Another possibility that we suggested is a specific duty to take an ecosystems approach, just as Marc Stutter discussed. However, that still has an anthropocentric element to it—it is still really about human use. A statement that includes the inherent value of water in its natural environment would perhaps be the strongest thing that you could put into the bill. Those are all choices that could be made, but explicit recognition of the social and environmental aspects is certainly necessary.

I very much agree with that. Although the focus on economic benefit is important, we increasingly need to better understand the social and environmental aspects. The area of ecosystem valuation is developing all the time, and more work is being done to understand what the different types of values are in terms of benefits that can be accrued. There needs to be flexibility in the bill to ensure that they are clearly recognised.

That development of an ecosystems approach is something that Scotland could export as part of its expertise.

What I failed to voice properly was the fact that it would be really nice and quite an exportable and tangible thing to be able to show that we can manage water well in Scotland using a concept such as the ecosystems approach. Water is central to a range of conflicting catchment uses—it is needed for renewable energy, for growing enough food and for providing habitat. Such an approach involves recognising that we have a number of competing users across a wide range of sectors and balancing all that so that we have enough water for all the users and services.

There is an issue that arises in relation to climate change. Driving towards an improvement in the standards for water and waste water tends to involve the use of quite a lot of energy. How do we balance the large energy input that is involved in achieving improved water standards with the need to meet our climate change carbon targets? How do we deal with that? There is nothing in the bill that would give you guidance on that, is there?

No—other than the requirement for Scottish Water to do more on our renewables agenda. Scottish Water is especially mindful of the difficulties that you talk about. As we move into the next regulatory period, perhaps we will see more emphasis on innovation—that is a word that I try to avoid using—and on solutions that are not low tech but more cognisant of the energy dimension of treatment.

I take it that you are looking for such issues to be covered by the bill’s wider approach and that you are not just focusing narrowly on the exploitation of the resource itself. Is that right?

Yes. There are two sides to that. There are aspects that are not covered in the bill, such as how we can derive benefits from protecting the water environment through minimising diffuse pollution and by increasing soil carbon in the catchment so that soil erodes less and stores more carbon. There are complex underlying issues that are not dealt with in the bill, but there are aspects that are covered in the bill, such as driving down energy use in water treatment and supply, encouraging water reuse and recovering more resources from what are currently called waste streams. If, as a key player, Scottish Water acts in collaboration rather than in competition with small and medium-sized enterprises in that industry, the bill has the potential to balance that side of things.

You also think that the linking of water resource use to the land use strategy is a benefit that could flow from the bill. What is your view on that?

It would certainly be good if the two went ahead together. The land use strategy mentions water, so any water strategy should refer to the land use strategy, because it covers broader, competing aspects of habitat and land use that all impact quite heavily on the water environment.

What I am driving at is whether we need changes to the bill to create such linkages or to ensure that they happen.

The Institution of Civil Engineers well recognises that sustainable water management is about much more than managing the assets for drinking water separately from doing all the other things. As you know, a lot of progress is being made in integrated catchment management and broadening the boundaries of the way in which we manage water.

I mentioned collaboration. It is necessary to ensure that there is strong collaboration between Scottish Water and its regulators and other stakeholders at a catchment level. Each catchment has different challenges and issues but, through the river basin planning process and so on, there are opportunities to develop those more cohesive approaches. The bill could do more to underscore the importance of catchment-based approaches.

I have a couple of more specific questions about the directions that Scottish ministers might issue to the designated bodies. Dr Hendry’s organisation has stated that the directions should be subject to a public consultation. What benefits would that bring? Is the list of designated bodies in the bill appropriate?

I have no concern about the list of designated bodies or the power of ministers to add to it with consultation. I know that some organisations have already asked whether they can be designated bodies. However, I have a general concern about directions in that, in effect, they have the force of law but they are not always published in the same way as a legal instrument. That is part of the reason why, in the centre’s submission and its response to the Government consultation, we suggested that directions should be consulted on unless they are made in an emergency and there is simply no time to consult—that is different. It should be a public consultation and there should be a commitment to publish the directions. They are usually available somewhere, but they are not always easy to find. The issue that we raised was a general one about transparency in the use of directions.

Does anyone else have a view on the subject?

The bodies that are mentioned in the bill seem to be an appropriate group to bring together to try to resolve some of the issues with funding and innovation. It would allow discussion of regulation and the regulatory barriers that might stand in the way of some of that innovation being realised. Scottish Water is in a unique position to lead and flagship that development, and the involvement of SEPA, SNH and Scottish Enterprise would be good. The Forestry Commission should perhaps be represented as it is quite a big landowner, especially in protected source regions.

I echo what Sarah Hendry said about consultation. It is particularly important to consult the other designated bodies before one of them is directed. The Government does not know everything, and something can always be learned from consultation. I do not see what objection there can be to consultation in cases where there is no urgency.

There is a proposed reporting period of three years. Some people have said that that is too short and that it should be changed, but others have welcomed it on the basis that it would fit with the six-year reporting cycle for river basin management plans. Do you have a view on the adequacy of the proposed three-year reporting period? What should the reports contain?

We are concerned that three years is too long to wait for the reports. Given that the hydro nation agenda is important to Scotland’s ability to make progress towards meeting its objectives, we believe that consideration should be given to more frequent reporting, certainly initially. That would establish momentum, ensure that progress is made and ensure that there is good return on the investment. The period could be reviewed in future.

12:00

We would like clarification that the reporting will be on-going. On one reading, section 4 could require a single report after three years or thereabouts. We also note that the bill repeals the high-level reporting mechanism under the Water Environment and Water Services (Scotland) Act 2003.

We would like on-going reporting—its periodicity is perhaps less important. We wonder whether an opportunity to coalesce exists, because reporting will still take place under the Flood Risk Management (Scotland) Act 2009. Reporting under WEWS is being removed, but there might be a rationale for having a single form of high-level reporting on the policy and legislative framework for managing water, which could incorporate action under all three acts.

The hydro nation agenda has built a head of steam in the past few months, and it would be nice to keep that momentum going. With that in mind, and given that the hydro nation is important, I believe that three years is a long time to wait for understanding and analysis of whether we are doing something correctly.

On the realisation of new flows of money into Scotland from European research and design sources, the hydro nation provides a good way for us to align with funds such as the EU framework funding for science and innovation under the horizon 2020 programme. If we are doing that wrong, there will be a big consequence down the line. I would like reporting to be done in stages and a bit earlier, if that is possible.

It is perhaps wrong to repeal the reporting duty on ministers under the 2003 act. The river basin management plan system has a six-yearly detailed reporting requirement, which serves a different purpose from that in section 26 of the 2003 act, which provides for an annual high-level report to Parliament. The provisions do not serve the same purpose.

As has been pointed out, it would be nice to review the bill in line with—and not in isolation from—all the other statutory instruments, as well as other tools for realising water benefits, to ensure that things are on track. That would be beneficial.

A related matter on which we would be interested to see information is the type of reporting that is being talked about. Should particular measures be developed that align with the objective of the hydro nation agenda and which could be reported on in relation to the different aspects that we have discussed? Such measures could concern direct economic benefit or other aspects, such as improvements in employment, education and knowledge development transfer. That would ensure that the reporting system adequately covers the agenda’s aspirations.

We will come back to that.

I am sure that we will.

I have questions on water abstraction, which was the surprise package in the proposals. Some of you have said that you have substantial concerns about the underlying purpose of—and even the need for—the provisions on abstraction. Will you explain your concerns and tell us how you might prefer the bill to deal with abstraction?

Our view—and, possibly more so, that of UKELA—is that a comprehensive set of abstraction controls already applies in Scotland under the controlled activities regulations and we struggle to see the added benefit that the bill will provide. I know that it is argued that ministers are better placed to consider economic and social aspects—UKELA’s submission discusses that more fully—but we see no reason in principle why ministers could not exercise their call-in powers over abstractions that are of certain types and above certain limits.

The CAR regime is well established and works well. It is thorough and has good provision for third-party representation and so forth. We find it difficult to see the added benefit of another layer of regulation.

The late inclusion of the abstraction provisions meant that they were not consulted on. Would there be merit in the Government consulting on them before the bill’s final stages in Parliament?

I do not think that I could answer that question. It is clear that a consultation is going on now through the parliamentary committee, and that might be the best approach at this stage. Time constraints might impact on that suggestion.

You should never overestimate the ability of a committee to influence the Government.

That is exactly what I meant. The committee is taking the matter forward, and perhaps that is a better place for the discussion at this stage.

My point was about how the 10 megalitres of water per day or the defined limit was reached in ministerial deliberation. The figure seems rather arbitrary. Obviously, the abstraction rate should be matched with the size of the water body or the other services that receive damage or losses because water is being abstracted, so it cannot necessarily be applied across the board as a single value. If that is dealt with in the CAR regime already, it will probably suffice, but if it is not, the bill should include something that looks a bit more specifically at where the water is taken from rather than a standard amount.

I very much agree with that. We appreciate that a limit would be wanted for practical purposes, but every catchment is different.

The other issue for us is that we would like a little more understanding of the reasons for the particular exemptions that are identified. There seems to be a wide number of exemptions to the new power, and it is not clear to us why some of those activities would be considered differently from other more general abstractions.

Will Mr Johnston and Mr Stutter say something about the concerns that they have expressed about the regime and the exemption of certain individuals or activities?

Obviously, a range of activities require water. I think that it has been discussed in previous evidence that some users or abstractors of water will return it virtually unpolluted, so they are simply temporary borrowers of it. Some may return water heated up, some may return it polluted, and some may evaporate it off to the sky.

Many different things can happen, and the question is whether the matter is dealt with successfully by an older system such as an abstraction licence system or whether it is time to look more at the quality of what is returned and look to consumption-based or usage-based financial schemes. That would take us more into payment for ecosystem services, but the bill could touch on that and make a new and fit-for-purpose scheme work.

I agree with that. The controlled activities regulations or the charging scheme that SEPA operates cover those nuances of consumptive and non-consumptive uses of water resources. However, things are not clear in the regulations because of how they have been drafted.

The issue goes back to the purpose of the proposed new regime. As members know, the controlled activities regulations are required to implement the provisions of the water framework directive. One of the provisions of that directive is that when a proposed abstraction would cause a deterioration in a water body’s ecological status—in other words, if an abstraction was so big that it would downgrade the water body’s status—SEPA must conduct a major balancing exercise that is based on sustainable development principles. It is therefore required to consider economic and social as well as environmental aspects.

SEPA has a well-developed method for dealing with those decisions, which it applies quite frequently. It has also been successfully defended on appeal, so it has been subject to scrutiny by Scottish Government reporters. It is not therefore accurate to say that SEPA only looks at the environmental aspects of major abstractions. I will not question the need for the regime on that ground.

I have some data on the numbers of authorised abstractions under the controlled activities regulations around the 10-megalitre threshold, if the committee is interested. The data that SEPA gave me exclude public water supply because of concerns—well, I will let SEPA explain that if it wants to. Public water supply would be exempt under the proposals anyway.

There are currently 199 authorised abstractions exceeding 10 megalitres per day, of which 177 would be exempt under the proposals. The remaining 22 are for industrial process water, although it is not clear from the data that I have received whether that is for cooling or other industrial uses. Below that threshold, there are about 100 abstractions of between 2 and 10 megalitres per day, so there are more in the higher category. Under the current proposals, we would be looking at 20 abstractions over the five years since CAR came into force.

On a slightly different tack, the centre for water law raised the issue of the ownership of water and the possible bulk sales of water outwith Scotland. Can you expand on those comments and tell us how that might impact on the proposals in the bill?

The committee has already had evidence from Stephen Rees. You asked him about ownership and I generally agree with everything that he said.

The history of who owns water in a mixed jurisdiction such as Scotland is very complex. We have our roots in Roman law, which was also very complex. We would generally say that there is no ownership of water as such, at least of running water, but that there are property rights that might amount to or look quite like some elements of ownership in terms of the degree of use that can be afforded.

The Water Environment and Water Services (Scotland) Act 2003 and the controlled activities regulations were not challenged in terms of prior ownership rights over water, which was really heartening. It indicates that users in Scotland are cognisant of the need for a modern water law regime that allocates water under a sensible licensing system.

Ownership is not really an issue for the policy and legislative framework. To be honest, I am not convinced that bulk water supply is an issue either, at least not in the sense of major transfers for public use. There are environmental and engineering issues around the bulk transfer of water. However, as the centre for water law understands it, in many places around the world when bulk transfers out of a jurisdiction are attempted, it triggers a lot of concern among the public and non-governmental organisations. At that point, questions around ownership might become a little livelier.

In our submission, we were just drawing attention to the fact that the position is not wholly clear. In many ways, the question has been overtaken by the current modern statutory framework, but issues might still arise, particularly in the context of bulk supply.

Can you not imagine circumstances during the projected lifetime of the proposed legislation in which, if the bill does not deal with those issues, it will be found to be inadequate?

Should the bill deal with ownership? When I am in other countries, I tend to take the view that the best thing that a water resources act or a water code could provide is that water is held in public trust. That answer to the ownership question is generally unobjectionable and hits all the right notes, in that the state has control over water in the public interest and can allocate it for beneficial uses and so on. That would be my preference in the framing of a modern water act.

When WEWS went through, the issue did not really have to be addressed so—perhaps sensibly—it was not. However, the general approach that I would take is that water should be held in public trust.

12:15

I support that. There might be an opportunity through the bill to clarify the matter, which, as Sarah Hendry says, is not clear. That approach would chime with Scottish Water’s status in Scotland, which contrasts with the situation in England. Scottish Water is our only public water company, so there is an opportunity to take such an approach.

To return to Alex Johnstone’s previous point, it would be a good idea for the Government to consult on the proposed new abstraction regime. That issue deserves wider scrutiny.

Perhaps it is more in line with the approach here that people should be regarded not as water owners but as custodians, and therefore as having to act in ways that minimise pollution or waste. People would never have ownership but would be responsible for water while it is on their land.

We will move on to Scottish Water’s functions.

Through its arm Scottish Water Horizons, Scottish Water is already investing in renewable energy sources and waste management activities. Therefore, is part 3 of the bill necessary?

I think that part 3 adds a deal of clarity and makes provision that does not currently exist. There are specific requirements on developing the assets and renewables. Although Scottish Water does those things anyway, the bill perhaps makes it clear that they are part of the hydro nation agenda. We also have a new definition of core functions. Sections 25 and 70 of the Water Industry (Scotland) Act 2002, when read together, are not wholly clear or the easiest provisions to read. Section 24 in the bill is certainly an improvement in that it specifies for the first time that the core functions relate to water and sewerage services.

Does that represent an expansion of Scottish Water’s core functions?

We have reflected a lot on that. Our concern is about the phrase “relating to”. Perhaps the issue is more about the policy context rather than the bill, but we wonder what the phrase

“relating to the provision of water or sewerage services”

means.

If Scottish Water generates renewable energy on-site for use in a treatment facility, that clearly relates to water and sewerage provision and so is core business that is regulated and paid for by the customers. If Scottish Water generates energy that goes solely to the grid through Scottish Water Horizons, that is on the non-core side. However, there could be grey areas where it is harder to draw the line, perhaps if some energy is used in-house and some is exported. Therefore, we need clarity on what is regulated business and what is Scottish Water Horizons business. That is what we are looking for.

In written evidence, the James Hutton Institute said that there is a need for

“‘localism’ in distribution, water reuse, waste stream separation and treatment.”

Will you expand on that and say how it relates to the proposals in the bill?

Lots of innovation is needed in the water sector to overcome the status quo of the inherited systems of distribution—particularly in a country such as Scotland that has a fragmented population—and our treatment of what are currently viewed, rather wastefully, as wastes. However, to do that requires infrastructural change on quite a large scale.

The fact that Scottish Water is a public body that is able to act outside the constraints of shareholders and so on puts Scotland and the hydro nation agenda in quite an enviable position, certainly in Europe. If we can capitalise on that and if, with the support of the bill, Scottish Water can take some slightly brave steps towards putting some of the infrastructure in place, we can perhaps do things more innovatively in the future. We can begin to separate wastes locally so that domestic waste is not being mixed with industrial waste and the potential reuse of the resource is not lost because it is contaminated.

If we can get Scottish Water to act a bit more innovatively and implement such local solutions as local water distribution and treatment to drive energy usage down, we can use that as an exportable model of how Scotland is a bit more revolutionary in how it is doing things. I see Scottish Water’s role as a pillar in the hydro nation agenda in contributing to such innovation.

Concerns have been raised by the energy and waste management sectors that granting these powers to Scottish Water will give it and its subsidiaries an unfair competitive advantage in the market. Does that concern you? Is that the reality?

Yes. We would not want to skew the marketplace against small companies that are trying to act on their own footing. The Parliament should, instead, come up with something whereby Scottish Water is seen as a big player in the hydro nation agenda along with the academic part of the research and development sector. If those two—Scottish Water and the academics—came together for the hydro nation agenda with the Scottish Government as an enabling body, and if Scottish Water was carefully positioned so that it did not act in competition with the SMEs but was a collaborator and enabler, that would hopefully resolve the issue. It is quite important that it is resolved.

On the flipside, one of the fundamental things to be encouraged, as far as Scottish Water is concerned, is resource efficiency. Whether that involves Scottish Water generating energy, which helps it to reduce its energy use, or making best use of the by-products of water treatment, thereby maximising the recovery of resources, it should be very much encouraged. That, again, could be used as an exemplar for other water companies and organisations that process inputs and produce outputs.

Fundamentally, it is a matter of moving away from the concept of an organisation producing a water and sewerage service and not worrying about everything else towards the maximally efficient use of resources through the operations that the organisation performs.

Part 4 of the bill allows Scottish Water to enter into agreements with landowners in order to undertake works to prevent deterioration in water quality. Concerns have been raised about the nature of those agreements, and it has been suggested that some clarification is required.

The written evidence from the centre for water law and UKELA asks that linkages between the proposals in part 4 and the existing regulation of raw water quality under the Water Environment and Water Services (Scotland) Act 2003 and the water framework directive be made more explicit. How could that be achieved?

We support part 4. We think that there is a great deal that water services providers, when they are vertically integrated, could and should be doing in terms of catchment protection at that scale.

The diffuse pollution regulations have been introduced and are being enforced by SEPA, although we understand that SEPA’s monitoring of water quality has been reducing for various reasons. We want to ensure that there is adequate tying-in of the two sets of activities—certainly, those are things that Scottish Water should be doing. We have suggested that there could be a specific duty on Scottish Water to co-operate with SEPA on processing and perhaps a wider duty of co-operation, such as we see in the Flood Risk Management (Scotland) Act 2009, to ensure that it works with all the key stakeholders when it takes forward the catchment initiatives.

We would be concerned to ensure—as I am sure will be the case—that nobody incentivises a land manager to do something that the criminal law requires them to do anyway.

Does anyone else want to add anything?

Sarah has covered it.

I will add one thing. It is a matter of linking the catchment of water source with the water itself. That is key and it brings in all the things that we said earlier about water being a limiting factor for developing other assets, such as renewable energy and food. As it is written, however, the bill is quite vague about that aspect. For example, section 28(2) states that Scottish Water

“may enter into agreements with ... owners and occupiers of ... land”,

as well as with local authorities to carry out “activities”. The use of words such as “agreements” and “activities” creates vagueness, compared with specific references in other parts of the bill to, for example, fats going down into the sewer network.

I do not know whether the wording in section 28(2) has been left vague for a purpose, but the issue is clearly important because Scottish Water is undertaking catchment-based solutions for some of their source-water problems—for example, with pesticides in the Ugie. SEPA obviously knows, from its priority catchments, that the issue is important and that it wraps up all the catchment aspects, such as the water blueprint that it is trying to implement. It is a big and important issue.

We have touched on SEPA. Some of the evidence that we have received has argued that it would be better for SEPA, rather than Scottish Water, to take on the new powers over raw water quality. Can you explain the reasoning behind that view, which I think came from the centre for water law and UKELA?

I think that we were making the point that SEPA has traditionally had the expertise in monitoring raw water quality and seeking to manage diffuse pollution. The diffuse pollution regulations in Scotland were quite innovative—very few countries have gone down that particular route—but they have not had a great deal of time to become embedded.

We recognise that the water services provider can play a key role as well, and we understand that there may be situations in which it would be in a better position to come to an agreement with a land manager than the regulator might be. We are not therefore suggesting that Scottish Water should not do such things, but we think that it is important that it co-operate closely with SEPA in particular and with other authorities.

SEPA is certainly the best regulatory body for undertaking the monitoring of whether water is fit for purpose. However, until quite recently with its excellent approach to the general binding rules, SEPA did not always make things happen on the ground. It is undertaking the priority catchment actions at the moment, but that work began only quite recently and there should be more of it.

Other bodies can do more of that work, too. Scottish Water is trying to do it in its own way, which appears to be very successful. Other bodies exist in Scotland, such as catchment management partnerships, which include SEPA and designated bodies and which are good models.

It is important for the committee to understand, if it does not already, that the diffuse pollution regulations, as part of the controlled activities regulations, involve no contact between individual operators and SEPA. The general binding rules are observed only in their breach, if you like. Basically, if someone complies with the rules, they are authorised and there is no contact with SEPA.

It is therefore important that a partnership approach is used by public bodies and that they share their resources in trying to enforce the regulations, because it is an enormous task. That is also why it has to be done on a priority basis, as Marc Sutter has said. However, it will be a long time before Scotland can say that we know that we have dealt with the diffuse pollution issue.

When that work started, the general binding rules were poorly understood, particularly among the farming community. It took SEPA’s wise actions in communicating them in a national campaign and then undergoing demonstrations and catchment walks before the message sunk in. Perhaps the bill could further the enabling of that kind of local, on-the-ground co-ordination.

12:30

I will ask some questions about septic tanks, if you do not mind. The bill will allow an individual to take action if two, three or four individuals share a septic tank, but at least one person will need to take action to get the septic tank sorted. They would need to pay up front and try to recover the costs from the other owners, which could end in court action. How effective will those provisions be in ensuring that maintenance of septic tanks occurs, taking into consideration that some owners will not want to pay for it? Could such situations be tackled in any other ways?

I think that it will be a huge improvement on the existing situation. Currently, even in a situation where one or more willing householders know about a problem and are willing to take action to do something about it, they are stuck. The provisions will at least improve the situation to the extent that one willing owner will be able to force—through legal action, if necessary—their fellow owners to help. The provision is not ideal, but it will be a big step forward.

Of course, SEPA has powers to deal with septic tank problems, but there is a similar enforcement issue. When groups of householders share a septic tank it is difficult to attribute blame even-handedly. Another thing is that SEPA does not yet know where all the septic tanks in Scotland are. The register is not yet complete because of the pragmatic approach that SEPA adopted to the implementation of CAR in the early years. A septic tank is brought to SEPA’s attention when there is a problem. Once people complain, registration happens and action occurs.

I support the measure. I cannot think of how to deal with a situation where there is not a willing owner, unfortunately, unless SEPA comes in. Inevitably, enforcement can require a heavy-handed approach. Perhaps there is no middle way.

I agree. We suggested the possibility of Scottish Water having a budget and being more proactive in taking over septic tanks in rural areas. I appreciate that there is a sense that that might interfere with individuals’ property rights, although in many cases if one is unlucky enough to be part-owner of a malfunctioning tank that would be quite welcome. There would certainly be a cost involved. You might say that that was equitable and that those of us who are lucky enough to live in the middle of Scotland get part of our mains drainage funded by Scottish Water, or you might say that it is too high a cost. We accept that that is not what has come forward in the bill.

Given the complexity, I tend to agree with Ian Cowan. The provision will solve the most common situation, where there is perhaps one recalcitrant owner. It will not solve situations where there is a whole group of them and just one person is expected to find the funds.

We also support the provision suggested in the UKELA response that if that part of the bill remains, standard forms should be made available in schedules to the bill. That would be really helpful to owners in those situations.

In addressing the regulation of water resources, we need to look at multiple-occupancy septic tanks, which are the next level down from water treatment works, rather than the much more diffuse individual tanks in rural environments. It is worth directing a little resource spend towards ascertaining whether those tanks are failing, because we can probably get more of a benefit for our money by tackling them rather than putting money into individual household tanks.

There are barriers with regard to some of the eco-innovation aspects of tidying up those effluents—for example, the use of willow biomass treatment beds. Even if the water in the bigger multiple-occupancy tanks is taken to a very clean state by some of those tertiary treatments, the rules say that it still cannot be discharged, so it would need to be piped away. There are some policy regulation clashes in that regard, and it would be sensible to target some actions at resolving those issues.

I do not have—and have never had—a septic tank, so I do not know what the repair costs might be. However, from a home owner’s point of view, if only one out of four people was willing to pay up front to get the septic tank repaired, there could be a large bill for that person. They may have to take out a personal loan to pay for it, knowing that they will have court costs to pay on top of that. With that in mind, do you think that a lot of people would be proactive in getting their septic tank repaired?

I have a septic tank, and I unfortunately had to get repairs done last year, although not to the tank itself. I share not the tank but the soak-away, which is where the effluent from the tank is dissipated into the ground; that is effectively the discharge point.

It cost £2,000 between three households to dig up and replace the whole soak-away, which was malfunctioning. I think that there would be concerns about getting disadvantaged householders to fork out.

Coupling the tank to its effluent outflow field is important when we come to deal with the specifics. People often talk about the tank when that is only about a third or a quarter of the treatment, most of which is done by filtration through the soil in the outflow field. In a lot of cases, that is piped directly to a stream when there is no effective treatment through the soil.

The written evidence that we have received is generally supportive of the proposed water shortage orders. Do you have any concerns about the new orders, particularly with regard to whether they might have a negative impact on businesses that rely on water use?

There are two ways in which a business might be affected, one of which is through the water-savings measures in schedule 2, whether they are being recommended as a preliminary stage before an order or accompanying an order. The other relates to businesses whose abstraction rights are affected by the new controls that are brought in. There is not much that we can do about that. If we are going to bring in a water shortage order that allows Scottish Water to make additional abstractions, one consequence will be a reduction in what other people can abstract.

On the water-saving measures, we argued strongly in the second Government consultation that the measures should apply to businesses as well as households in the first place, and I think that that is now the case. Consumer Focus Scotland suggested that that part could be a bit clearer, because it refers to people. It is important on equitable grounds that the measures apply to both domestic and commercial users, and the right balance has now been struck in part 7.

As there are no further questions, I thank the witnesses for their evidence. It was very helpful for our consideration of the bill. I ask the witnesses to leave quietly so that the committee can crack on with the rest of our agenda.