Scottish Water
The fourth item of business is to consider correspondence from the Executive on borrowing limits available to Scottish Water. As members know, we published our report on Scottish Water last Friday and the letter is in response to an issue raised and correspondence sent while we were dealing with the report. I make it clear that we will not raise again all the issues that were dealt with in the report. The committee has published its report, so members should confine their comments to the issue of how we handle the correspondence that we have received. I will not tolerate a re-opening of the general issues in the report. Fergus Ewing has asked for this matter to be raised.
My request is to do with not so much re-opening the report as pursuing the recommendation contained in paragraph 95 of the report, which relates to transparency in the provision of information.
We first asked the Executive for its response to the Cuthberts' analysis on 3 December 2003. We received evidence from the Executive and then we wrote again for further information, which we received. However, until we were in the final stages of compiling our report in private, we did not receive the news from the Executive that, back in April 2002, before the creation of Scottish Water, there was an additional £200 million borrowing provision. It is hardly transparent if we do not receive key information during the compilation of a report that bears expressly on the prudent level of borrowing until the final stages of that report.
In consequence, we wrote to the Executive on 1 April 2004 to ask for documentary evidence of that £200 million borrowing provision. In response, we received a letter from Allan Wilson dated 19 April, from which I will quote. He states:
"Ministers therefore ensured that £200 million in addition to the levels suggested … would be available to Scottish Water if required over the four year period. This additional borrowing would have been within the limits approved by Parliament and already in the public domain, so formal notification was not made to any of the parties involved."
As you will note from the letter of 1 April, convener, we asked for documentary evidence and whether Scottish Water and the water industry commissioner were made aware of that additional provision. However, all that we have received in response is no documentary evidence and no direct response as to whether Scottish Water or the WIC knew about that provision.
A number of serious questions arise. Were Scottish Water and/or the WIC made aware of the additional provision? If so, did that happen sometime around April 2002? The Executive has still not said. If neither Scottish Water nor the WIC knew about the provision, what conceivable purpose could it have?
When Andrew Scott gave evidence on 3 February, he was asked to state the Executive's position on borrowing, so why did he not mention that specific figure? He mentioned various other figures, and I have reread the Official Report of that meeting, but no reference at all was made to the provision. Why did we not hear about it, given that it was absolutely key to the inquiry?
My second-last point is that we have had absolutely no documentary evidence that that £200 million borrowing provision ever existed. It is a bit like me going into a bank and asking a bank clerk for a loan. The bank clerk might say, "Yes. How much would you like, Mr Ewing?" to which I might respond, "Two hundred million pounds, please." The clerk might then say, "Well, that should be all right. How would you like it?" I might say, "In cash please. Do I need to sign anything?" and the clerk might reply, "Oh no. That won't be necessary."
My point is that we have had no paperwork to show that that £200 million borrowing provision ever existed. If there is to be any transparency around the Scottish Parliament, we have to see that paperwork. We do not know, even now, whether any letters were exchanged between the Executive and Scottish Water or the Executive and the WIC. With regard to the lack of transparency that the committee acknowledged in its report, we can say that, at the very least, the Executive has failed to disclose relevant information to a committee of the Scottish Parliament that is carrying out what we would all agree was a highly complex piece of work in which facts are key. In addition, there are serious questions about whether the £200 million borrowing provision ever existed.
Finally, I have heard from the chief executive of the Civil Engineers Contractors Association Scotland that, in 2003-04, there has been a massive underinvestment in the water sector—£167 million of £320 million was spent. That indicates that, while we have the confirmed outturn figures for 2002-03 at paragraph 94 of our report, the actual borrowing outturn figures are likely to be far lower than those in our report, indicating persistent, continuing and possibly endemic underinvestment. In our report, we recognised that we did not have the necessary evidence at that time. I am not seeking to revisit the majority of the report but it seems to me that the ministers must explain as a matter of urgency why there continues to be such major underinvestment.
Of course, some of us—Jim Mather, myself and, I think, John Swinburne—believe that that underinvestment was partly due to the tight borrowing limits that were set and of which we were aware. It appears possible that the additional £200 million was never communicated to Scottish Water or the WIC. Certainly, neither of them told us about it when they came before us to give evidence about this matter.
There is a continuing concern, which is expressed in the report, about a lack of transparency. We would anticipate that the Executive would give us a full response to the report that the committee agreed. Clearly, it will be up to the committee to decide what to do once the response is received. The points that you make about the lack of transparency with regard to the £200 million are pertinent. We could write to the Executive, in the context of its full response, to ask it to address the specific issues of transparency that have been raised. That would allow us to get a comprehensive response to the issues that have been raised in the report.
I am grateful for that measured response. Given that we have already asked for documentary evidence and have not been given it, can we incorporate in the letter a request to see the documents surrounding the issue of the £200 million and the correspondence—if any—that passed between the Executive and Scottish Water and the Executive and the WIC? It is only fair for us to ask to see such background papers, given the absolute lack of transparency on this vital matter. Obviously, if the committee does not agree to ask for that information, it is open to MSPs to do so, but it would be a recognition of the importance that we all place on openness and transparency in the Scottish Parliament if the committee were to ask for and secure that information, which should have been provided last December.
If you read the letters in my name dated 1 April and, particularly, 24 March to the Executive, you will see that we were asking for those specific bits of information. It is, of course, open to us to repeat that request in the context of getting an overall response from the Executive to the committee's report. It is important to ensure that we get a response from the Executive to the issues that we raised in our report and to deal with that response in the appropriate way.
That is important. However, the letter that was sent by you on 1 April states that
"the Committee would like to know whether there was Ministerial correspondence between the Executive and Scottish Water … on this matter and whether the Water Industry Commissioner was made aware of the additional borrowing provision."
The letter does not ask to see the documents. Of course, the questions in the letter were unanswered because the Executive did not say whether the WIC was made aware of that additional borrowing provision. All that it said was that there was "no formal notification". However, that suggests that there could have been informal notification. If there was, why did neither Scottish Water nor the WIC tell us? If the officials knew that there was a £200 million borrowing provision lurking around, why did they keep that secret?
We have to get to the bottom of this matter. Any of us, as MSPs, can ask to see the information, but I sincerely hope that we can maintain a united front and try to get to the truth of the matter as a committee.
Again, if you read the letter that was sent on 24 March, you will see that it specifically asks for a written record of the additional provision to be made available to the committee. We could repeat that specific request.
Does the committee agree to draft the letter in the manner that we have discussed?
Members indicated agreement.