Scottish Water
The next item of business is a debate on motion S2M-5510, in the name of Mark Ruskell, on Scottish Water.
This debate is an opportunity for all of us in the chamber—apart from the Tories—to restate our commitment to public ownership and control of Scottish Water and to welcome its improved performance in recent years. The number of complaints has dropped by a fifth in the past two years, whereas the number of complaints south of the border has increased by a tenth this year alone. That speaks volumes.
Does the member agree with the water industry commissioner's report that, for every million gallons of expensively treated water that is produced, half a million gallons leak from our pipes? Our sewers are flooding with non-statutory surface water. Does the member accept that, under the charging system, the required improvements are not achievable within an affordable system?
I argue that the regulatory system is at fault. We can trade figures throughout the debate, but South West Water's charges for the coming year will be 40 per cent higher than those of Scottish Water's charges. The Tories' amendment mentions the Welsh Water model, but its annual charges are 15 per cent higher than those of Scottish Water.
There is considerable room for improvement, and this morning's debate is a chance to expose where the weaknesses lie in regulation of the public utility. Those weaknesses mean that the vultures are circling, waiting for the pressure for further privatisation to mount before they move in. We must be mindful of the pressures as we enter a new programme of investment that will place new challenges on the industry.
The debate also gives us a chance to discuss the Welsh model of mutualisation, which looks and smells like public ownership but will lead to an inevitable drift towards full privatisation. Why would the Tories push such a Trojan horse into the debate, other than to tempt waverers such as Christine May?
The Greens reluctantly supported the Water Services etc (Scotland) Bill. We understood the context whereby the neo-liberal pressure of the World Trade Organization led to pressure on the European Union, which eventually led to a United Kingdom competition act. That left the Scottish Executive with no option. A limited form of privatisation of the handling of business customers was the least bad option and was better than the prospect of multinational corporations carving up the Scottish water industry in the courts to suit themselves.
However, we voiced concerns then—we voice them again now—about the remit of the water industry regulator and the methods that are used to regulate our industry economically. A public utility is being regulated as if it were a private corporation. The primary functions of Scottish Water must be sustainable development in its three strands: the delivery of an enhanced environment, a fair price to citizens for a basic need and the delivery of economic health to the country as a whole.
Although Scottish Water has a duty to deliver sustainable development, the Water Industry Commission for Scotland does not view the world through the same lens. There is a mismatch. Ministers are clear about objectives and Scottish Water plans what it has to do to meet them. The Scottish Environment Protection Agency and the drinking water quality regulator for Scotland are focused on the objectives too, but the WIC makes the final determination on the grounds of market economics and efficiency. Its primary focus is the delivery of the lowest cost. The arbitration of any determination that the WIC makes goes not to ministers but to the Competition Commission—a body whose world view is also narrowly focused on issues of market efficiency rather than on the delivery of long-term public objectives.
In recent months, a new role emerged for the WIC. As a champion of privatisation, its chair, Sir Ian Byatt, talked on 5 June last year about leakage and the "dilemma" that regulators face. He said:
"should they act as agents of ministers, or should they have a role in protecting customers against policies that are cost ineffective?"
There is a thought—let us protect the voters from the crazy policies of the Government that the voters elected.
Hear, hear.
A blow for democracy over there.
The view was also reported that Scottish Water should be freed from state ownership, but that was apparently a misrepresentation of the WIC's view. Perhaps that is why it felt it necessary to get its message across by employing a team of lobbyists, presumably to battle the lobbyists that are employed on the other side by Scottish Water. I know that some competition has been introduced to the water industry, but I do not think that that is the kind of competition that ministers were thinking of. The two bodies certainly do not operate within the same framework to deliver long-term public objectives.
Let us examine a particular quality issue that was raised by the chair of the WIC. Because of leakage, consumers pay for twice as much water as they receive. Leakage creates a cost not only to consumers but to the environment, but we have a regulatory mechanism that uses the regulatory capital value method, the result of which is that it is more profitable to pump water through the system than it is to repair the system as a revenue cost.
It is Scotland's water, not the WIC's. There are models of publicly accountable water delivery, such as Stockholm Vatten, that put public sustainability objectives first. We should benchmark Scottish Water against such models rather than against a private model of water delivery from England that has led to the scandal of billions of pounds being siphoned off for shareholders' profits.
The role of the WIC should be brought into line with those of ministers and Scottish Water. Economic regulation is vital, but it should not sit as the overarching framework for public service delivery. That framework should be sustainable development, which will deal with our needs and those of our children and their children to come, rather than the short-termism of the market. That is the right vision for our public services.
I move,
That the Parliament notes growing pressure for Scottish Water to be privatised; further notes the substantial improvements that have been made in Scottish Water's performance, all of this having been achieved while keeping Scottish Water in the public sector; notes the Water Industry Commission's lack of a wider social and environmental remit and its use of a regulatory model more suited to a private utility than to a public one; considers that improving the service, upgrading the water and sewerage system, reducing leakages and ensuring effective regulation should not centre on short-term efficiency measures but on the quality and safe delivery of services in the long term, and affirms its commitment to keeping Scottish Water under public ownership and control.
I very much welcome the debate. We have systems of managing our water networks in Scotland that are different from those in the rest of the United Kingdom. That is a result of our policies and the ability to deliver them through this Scottish Parliament.
Mark Ruskell's motion notes the substantial improvements that Scottish Water, operating in the public sector, has delivered. I go further in my amendment by welcoming those improvements. Scottish Executive policies have transformed our water industry into a more effective and efficient organisation that delivers improved performance for less money.
Will the minister take an intervention.
No thanks. I want to get started.
We have a unique model: it is a third way that provides a public sector company that is directed by ministerial policy, that has an overarching requirement for sustainable development and which is regulated and benchmarked against the private sector. Scottish Water reinvests in water the efficiency savings that it makes.
It has been a challenging time for Scottish Water. We pulled together three separate water authorities into a single operation. We transformed the services that it has delivered to 2.2 million households and 136,000 business customers through improved operational practices and a £1.8 billion investment programme, which was supported by £600 million of borrowing from the Executive.
Other countries have been interested in the model in Scotland. South Africa was very interested and sent representatives to Parliament to meet one of my predecessors, Lewis Macdonald, and to see how the public company and regulation system worked together. Northern Ireland was also very interested in our approach. The model is unique to us in Scotland, but it has worked.
Does the minister accept that in all Scottish Water's new works it is in partnership with private companies such as Miller Group, Babtie Group and so on and that, therefore, Scottish Water is already partly privatised?
No. Scottish Water is using private companies to deliver our investment programme, which is set by Scottish ministers. It is using the best system of delivery. It is not a private system. Scottish Water is using companies that are directed by the public sector. We see that throughout Scottish investment, which is a good thing.
Let us consider the unprecedented levels of cost reduction that the partnership has been able to deliver in Scotland. The Water Industry Commission has calculated that savings of £946 million in operational and capital costs have been made. Those are unprecedented levels of efficiency, even for the water industry in the public sector. The savings equate to £211 in the average household bill in Scotland over the four years. Those are important savings for people who need to know that Scottish Water is spending our money properly.
Will the minister take an intervention?
No, thank you. I want to get on.
That means that Scottish Water is delivering more for less. Our constituents are benefiting from lower charges, Scotland is benefiting from improvement in the environment and drinking water quality and, crucially, our economy is benefiting from a better service being delivered more efficiently. Those achievements are good news and we should pause to congratulate Scottish Water on its successes, which have been delivered by a focused and determined management and dedicated staff. They have shown that our model for the water industry, operating in the public sector, can match the performance of the very best of the private sector.
Mark Ruskell's motion displays a fundamental misunderstanding. He is wrong to assume that such improvements can be delivered without the system of robust economic regulation that this Administration put in place, which was approved by Parliament, with the support of Mr Ruskell's party. In the stage 3 debate on the Water Services etc (Scotland) Bill, Mr Ruskell said:
"The delivery of water services in Scotland is about striking a crucial balance between the economy, the environment and social justice. Those three drivers need to be at the heart of the development of our water services. I am content that the bill offers a structure to enable that balance to be struck and controlled by the Parliament."—[Official Report, 9 February 2005; c 14378.]
That is what we have—the correct system of regulation for Scottish Water. It achieves the maximum affordable improvement in public health and standards of environmental protection by improving our drinking water quality and the quality of discharges to the water environment. It supports housing and economic growth throughout Scotland through investment in new strategic water and sewerage capacity. It delivers those outcomes with a capital programme that means that we will get delivery over the next few years and that water charges will remain affordable. That is what customers want, that is what the people of Scotland want and that is what Parliament voted for.
I move amendment S2M-5510.2, to leave out from first "notes" to end and insert:
""welcomes the substantial improvements that have been made in Scottish Water's performance, all of this having been achieved while keeping Scottish Water in the public sector; recognises that the objectives set by ministers for 2006-14, which properly recognise the social and environmental priorities of the Scottish Executive, will not only deliver further improvements in drinking water quality, environmental protection, and customer service but also relieve development constraints, upgrade the water and sewerage system and reduce leakages; recognises that the role of the Water Industry Commission for Scotland is to assess the lowest reasonable overall costs of delivering the objectives that ministers have specified, taking account of appropriate external benchmarks, and affirms that Scottish Water operating in the current regulatory framework will go on to deliver further improvements in this vital public service."
We started this morning with a consensual debate on procurement from the Greens. I am disappointed that this debate will not produce the same cross-party consensus, but I am pleased that the Greens have acknowledged in their motion the growing pressure for privatisation of the water industry—a cause that we have championed for many years. I am delighted that it has been acknowledged that the campaign on water that we have been leading is attracting support from other quarters. People such as Sir Ian Byatt, Sam Galbraith, the former Labour minister, and Jo Armstrong, the former adviser to the First Minister, are all queuing up to support our calls for the privatisation of Scottish Water. I am delighted that the Scottish Green Party has acknowledged the fact that we are winning friends.
Mark Ruskell said that Scottish Water had made some improvements, which I acknowledge. Six years after its creation, we have seen one year of improvements in Scottish Water. I pay tribute to the chairman, the board and the staff of Scottish Water for making that possible, but Scottish Water is still not doing as well as it should be doing and for the past five years it has woefully let down too many people in Scotland.
Businesses have been overcharged. In February 2005, the Executive admitted that Scottish Water had overcharged businesses in Scotland by £44 million a year. In comparison with many companies down south, businesses in Scotland are still paying far too much for their water and are being put at a competitive disadvantage.
Is the member aware that Banff and Buchan College's Peterhead centre, which is in my constituency, has just received a bill for £39,000, which represents use of 20,000 tonnes of water? That is, of course, down to the private sector company that has been hired by Scottish Water, which read the meters so inefficiently and incorrectly. Is one of the advantages of having private sector companies engage with the public that we can see that they are capable of making errors at least as great as any in the public sector?
I am sure that the private sector will make errors in many cases.
I was going to talk about the Welsh Water model, which of course has support from Mr Stevenson's colleagues. If I remember correctly, his colleague Mr Gibson, who is sitting beside him, lodged a motion in 2005 praising the performance of Welsh Water, which was and is the top-performing private water and sewerage company in England and Wales. Perhaps we need a bit of consistency from the Scottish National Party.
The problem with Scottish Water is that there are still inefficiencies in the system. Mark Ruskell did not mention development constraints, perhaps because the Greens do not really care about development. Such constraints continue to be a major problem and hold up development of the Scottish economy. We need to get more capital investment from Scottish Water.
The Office of Water Services—Ofwat—report from last March ranked Scottish Water behind every one of the 22 private water companies south of the border. Yes, its performance has improved in the past year, but it has not improved enough and it needs to do more. It is a pity that the conclusion that the Greens drew in their motion, that Scottish Water needs to remain in public ownership, is a complete non-sequitur in the situation that we face.
As members know, our proposal is to follow the Welsh Water model. It is a not-for-dividend model, where profits are reinvested. Need I remind members that Welsh Water is the best performing water company in the United Kingdom? It is efficient, it delivers high water quality and it delivers high levels of investment, because it can borrow money on the money markets. We do not mutualise Scottish Water purely because of the blinkered ideology of the other parties in this chamber. It is time to put the needs of the Scottish economy and the needs of water customers before dogma and to move ahead to mutualise Scottish Water.
I move S2M-5510.1, to leave out from "further notes" to end and insert:
"believes that Scottish Water is failing its customers because it is inefficient, misallocates resources, overcharges customers, particularly businesses which were overcharged by £44 million every year, and holds back much-needed development; further believes that Scottish Water must be removed from state control and transferred into a ‘not-for-dividend' organisation in line with Welsh Water, and considers that this would enable Scottish customers to benefit from the lower costs and higher levels of service enjoyed by their counterparts south of the Border."
If we are to believe Murdo Fraser, privatisation is built into the model that has been delivered by the Scottish Executive. He also wants us to believe that the mutual model that he supports is a private sector model, but, in fact, mutual models such as not-for-profit trusts are not private sector models. Indeed, in the case of United Utilities, it is all the subcontractors that are doing the work and, yes, they are the ones that are making the profits. We need to mutualise the subcontractors as much as the company itself.
The SNP has a fundamental problem with the model and the way in which its accountancy system has been set up. The Finance Committee's minority report of a couple of years ago, which Jim Mather led, confirmed that accountancy method and identified
"a pattern of obfuscation and deceit on the part of the Executive and the WIC, attempting to confuse and make acceptable the unacceptable suggestion that the strategy was justified because it complied with resource accounting and budgeting; because it was in line with free cash ratios elsewhere and regulatory current value; or because the Treasury said that it was okay."—[Official Report, 2 March 2006; c 23714.]
How can a public water system, in any form, be compared with a private water system? If a water system is truly public, it cannot be compared in that way.
Let us consider the question of borrowing. Why should borrowing for a public company have to follow the private model? Publicly owned bodies such as Scottish Water might have different sources available to them, which are not available to private firms. It is up to the Government to ensure that that is possible. Given the fact that Scottish Water is passing back £162 million of borrowing requirement that it had last year for the Government to recycle into other projects, we must question the accountancy method that is being used.
On the question of improvements in performance, as I said, we must compare like with like. There is no guarantee that the model that the SNP prefers is the one that Labour wants to maintain. Labour—which may be in a minority Government, supported by the Tories, at some time in the distant future—could easily find Scottish Water to be the sort of body that it could sell off to make some quick cash to invest in a project. That is the danger that is built in, and we must change it.
Would Rob Gibson like to explain specifically what model the SNP supports and how it would deliver that?
Certainly.
You have one minute.
We need a Government that is prepared to direct the process to the WIC and Scottish Water and which sets priorities that can be achieved by the accountancy model that we want to have in place. Mr Mather will explain in detail how we should achieve that. The economists know how to do that, but the present Government does not employ them.
The WIC has been trying to achieve a lot of short-term hits and has not been investing in the long term. Why should existing customers pay 86p or more in the pound for every pound that is invested in the water infrastructure? That is a crazy model of accountancy that provides customers, whether businesses or residents, with water that is far too expensive.
I turn to a classic example of why the system has not worked, concerning leakages and smells.
Your time is up.
There is a large sewage plant at Seafield that affects 30,000 people because of the unbearable smells that come from it in the summer.
Mr Gibson, you must wind up.
I am winding up.
The Green party motion suggests that it is possible to have the current model and, with direction, ensure that it works.
I am sorry, Mr Gibson, but you must stop now. You are way over time.
On the way to Parliament today, I was, for a short time, critical of Scottish Water. There was a hold-up in the traffic, and it was only when I read the explanation as I approached the traffic lights that I discovered that Scottish Water was laying yet another new water main. If it is not laying new water mains, it is installing replacement sewers; if it is not making one improvement, it is making another. The reality is that it is far more usual to encounter roadworks caused by Scottish Water than it was back in the days when the local authorities were responsible for that public utility.
Last week, David Davidson—who, I am sorry to see, is not here today—described me, in a mean and thin comment, as not knowing whether I wanted to be an MSP or a councillor, without realising that there might be benefits to seeing government at two levels. In preparing for today's debate, I came across the former Fife Regional Council's capital plan for water and sewerage from some 20 years ago. Iain Smith—a colleague at that time—said that I was a sad person to keep such documents. As a good Liberal Democrat, he had recycled his copies of them, but I have kept mine. Those were the days when the Tories capped capital expenditure by the council and, after we had fulfilled our statutory obligations, there was little left in the local authority pot for upgrading the water supply network or carrying out work on sewage treatment plants.
Will the member give way?
No. I have only four minutes; otherwise, I would.
Twenty years ago, the total proposed capital spend on water services and sewage works in Fife was some £5 million, which did not go far towards replacing much of the pipework that had been laid by our Victorian predecessors. Based on using the usual multiplier of 10 to get a Scottish figure for that time, the investment in water and sewerage services for the whole of Scotland could only have been about £50 million annually. Even allowing for inflation over the following two decades, that is a tiny, insignificant sum compared with the capital programme of Scottish Water today—£1,800 million in the first four years of Scottish Water's operation and another £2.5 billion in the current four-year period. One of the brakes against more investment is the ability of our civil engineering industry to deliver more works effectively and, in financial terms, efficiently.
Will the member take a 10-word intervention?
I do not believe that Stewart Stevenson has ever made a 10-word intervention, so I will not take it.
Will the member take a five-word intervention?
No.
A comparison shows just how much the water industry has been transformed in the past two decades. In 1987, some £16,000 was allocated for water treatment in Fife. I ask members to compare that figure with the £220 million that is allocated in this year's Scottish Water budget for improving water quality.
Will the member take a four-word intervention?
Yes.
Mutualisation: yes or no?
I think that Mark Ruskell was in the chamber when Ross Finnie gave a definitive figure for the implementation of that. However, I agree with Mark Ruskell that the vast majority of Scots do not want to see water services being privatised. They do not want to see them as a profit-making vehicle for a company whose shareholders' preferences come before its ensuring good water supplies and effective treatment.
I do not deny that there is a great deal to do. Like most members, I handle complaints and requests from the public who have concerns about the delivery of water. Nevertheless, it must be remembered that we have raised the bar in terms of the quality of the water that is both going in and going out. We politicians should quietly consider whether, following two major reorganisations in the Scottish water industry in recent years, we should allow a period of consolidation. We should not spark uncertainty in the organisation and its staff over the possibility of yet another major shift, especially when Scottish Water is in the middle of delivering a major investment programme. We should allow Scottish Water to settle down and deliver its ambitious forward works.
There is no pressure to privatise Scottish Water coming from this side of the chamber. Scottish Water is a publicly owned company that is subject to tight regulation to ensure economic rigour, environmental rigour and drinking water quality. Its social remit is determined by Executive ministers under the scrutiny of the Parliament. That is why, for example, funding is being provided by Communities Scotland to support water and sewerage infrastructure for affordable housing in rural areas and why there is protection for those who are on low incomes. The economic regulator ensures that those social goods are delivered efficiently; he cannot change the policy.
Scottish Water was set up as a publicly owned company so that private water companies could not cherry pick the easy-to-deliver or affluent areas of Scotland and abandon remote rural communities, many of which exist in the area that I represent. That was a real fear at the time when the former Transport and the Environment Committee, in the first session of Parliament, was debating how the whole of Scotland should be served. We considered all the possible models for the new Scottish Water, which was formed from three existing water companies, and decided that the public sector model would deliver best.
Why has the argument about cherry picking and services for remote rural areas not been an issue in Wales?
The situation in Scotland is different from that in Wales. Wales might have some rural areas, but Scotland has some very remote rural areas.
Scottish Water's objectives are challenging, whether they are about improving the environmental status of rivers and coastal waters; tackling odour from sewage farms; tackling development constraints; or dealing with leakage from the existing infrastructure. Correspondence on most of those matters has filled our postbags from time to time and we have all been robust with Scottish Water when we have perceived its failings. Concern about leakages, however, has not featured in my postbag, yet loss of water that has been treated to the highest possible standard is a waste of resources. Climate change will mean that we have to address that as a matter of some urgency.
We are not taking into account properly the need to conserve water. Even here in Scotland, demand outstrips our ability to supply water because, for example, of access difficulties to more remotely located potential reservoirs or because the local water is heavily peated and difficult to bring up to the required drinking water standard. Members might have noted the proposal to use Loch Ness as a reservoir for the Inverness area. Where will we find easy access to more water in other areas? It is crucial that we minimise leakage and take water conservation seriously.
The water framework directive requires Scottish Water to deal with leakage, but what can consumers do to conserve water? First, we have to educate ourselves. The east of Scotland is becoming drier, so we need to act now to prevent future long-term water shortages such as that which happened in Dundee in 2004. We must stop the ever-increasing rise in household water consumption and the consumption of high-quality and expensively treated drinking water for washing dishes and clothes, flushing toilets, watering gardens and so on. Producing such high-quality water takes a lot of energy, and we need to be more considerate about how we use it.
Households waste most water by leaving on garden sprinklers. People should get a water butt; large house and garden stores stock them and more and more people are buying them. Some water butts can be plumbed into the toilet or washing machine. Water tanks can be set into the ground to collect run-off from a driveway. We must consider how future homes and businesses can be water efficient as well as energy efficient.
According to a survey by LogicaCMG for Waterwise, 60 per cent of Scots actively look for ways to reduce water consumption and 80 per cent believe that a Government campaign would help them to be more water aware. Perhaps the minister will consider launching a campaign.
As we have heard, the United Kingdom water industry is privatised in England, mutually owned in Wales and publicly owned in Scotland. As a result, there is no Westminster funding for Scottish Water, and the Executive's solution has been to try to make Scottish Water largely self-funding. The problem is that the situation has arisen at the same time as a combination of 100 years of neglect of the water infrastructure coming home to roost and European Union directives landing on us.
In the process, the Executive has created a cash cow out of Scottish Water. It has deviated from the sound financial principle of net new capital investment being funded from borrowing. If that principle is breached, we are asking today's customers to subsidise tomorrow's customers; that is why John Swinburne supported the minority report in the Finance Committee. It also risks damaging high prices that erode competitiveness. As I said, the Executive has created a cash cow.
In April 2003, I took a phone call from a silversmith on Mull, who told me that his water bill of £70 was about to rise to £400. That was when we triggered the Finance Committee to act and called on Jim and Margaret Cuthbert—Jim is the former chief statistician at the Scottish Office and Margaret is a senior economist—to get involved with the committee on the project. They brought to light the errors, overcharging and planned elimination of Scottish Water debt, and they had an effect. While the Finance Committee produced a majority whitewash report, the WIC had his wings clipped by having a water commission imposed upon him. The precipitate debt reduction was slowed; it was going to be £17 million by 2016, but that was flattened out. Charges were also flattened. The privatisation risk receded, or so we thought.
In the meantime, there has been a mammoth increase in charges, mainly for business customers. Lots of money was released back to the Executive to be released into other projects. There was the absolute embarrassment of the three years' financial accounts to 31 March 2005, which showed that 86.6p of every pound of capital expenditure was paid for by current water charge payers. On top of that, we had false economies and development bottlenecks all across Scotland.
The Cuthberts are now going further and saying that, in the period 2002-2010, the overcharge will be something like £940 million. That has been denied by assertion by the Executive, by a majority of the Finance Committee and by the adviser to the Finance Committee; it has never been denied by proof.
Some responses to freedom of information requests now show co-ordination between the committee's adviser and civil servants to argue away the Cuthberts' points. One of the FOI responses from a senior civil servant says of paragraph 6 of Arthur Midwinter's report:
"The final sentence must make clear that the £32bn relates to the replacement cost not the current worth of the assets. I doubt we would find a buyer for SW if the price tag was £32bn!"
Scottish Water could be a key element in the competitiveness of all Scottish business forever: an unchallengeable, valuable, permanent, legitimate state aid. But what have we had? The limited borrowing continues; Professor Alexander has resigned; there have been more false economies; communities feel that they are being ignored and that development bottlenecks have been imposed on them; and the Scottish Executive inquiry reporters unit has been brought into disrepute. The situation looks right for privatisation. Charges are high; assets are being built up and improved; there have been massive tax losses; debt has been held down; and the system is designed to maximise future profits. The crisis of confidence in Scottish Water and risk are being talked up.
We should look at the results of the English water authorities. In the first nine years, 201 per cent of the face value of the shares was paid back in dividends. That is not going to happen here; it cannot happen here.
I welcome the debate that the Greens have brought on water. The key word is "vigilance". The Scottish Socialist Party voted against the Water Services etc (Scotland) Act 2005 because it was a stepping stone to privatisation. It introduced competition into Scottish Water and forced it to set up a private arm—Scottish Water Retail—which is to act entirely separately from Scottish Water as an essentially private company within a public corporation.
The elephant in the room is that the Executive is in favour of privatisation; that is the real position. I do not accept Maureen Macmillan's point—
On that point, does it strike the member as significant that while some of the words in the Green party's motion are incorporated into the Executive's amendment, the commitment to keeping Scottish Water in public ownership and control is missing?
I agree completely with Mark Ballard. It is also missing from Jack McConnell's comments on the forthcoming Labour Party manifesto.
The member has seen the manifesto, has she?
I have seen Jack McConnell's comments; he was asked to rule out privatisation.
The ideology is that the Labour Party believes in the market. I remember meeting the head of Scottish Water just after I was elected and asking him to justify BP Grangemouth, which uses more water than anyone else in Scotland, getting its water for almost half the price per unit that I or any member here pays. He tried to defend the idea by saying that BP Grangemouth is a big customer that brings in many millions of pounds per year, so Scottish Water gives it a discount. He said that BP Grangemouth could go elsewhere for its water, and I asked where it would go for that amount of water in Scotland. That is a political decision. If a company is not given the opportunity to go anywhere else, it has to buy from Scottish Water. There is a political ideology at the root of the situation.
Labour, in particular, agrees with that. Given that it appointed the members of the WIC—it is no secret that those members are in favour of privatisation and believe that it would be much more effective—Labour has appointed privateers to be advisers to the minister on Scottish Water. Should that not tell the Parliament something about the direction in which we are going?
Current customers are being forced to pay for the investment programme to improve the infrastructure so that Scottish Water can be privatised and floated on the stock market. Future profits are on the agenda.
Water is a scarcity in the world; there is a world shortage and that is driving up prices. Scotland has an abundance of water, and big companies that want not just to provide it to us, but to sell it internationally, are circling. The Executive has a political problem that is at the root of the debate. It cannot move openly and publicly in the direction of privatisation and state its intention, because there is massive opposition to water privatisation in Scotland, so it is trying to achieve its objective by stealth. The WIC is in favour of privatisation. Private companies have been introduced by the Water Services etc (Scotland) Act 2005. Scottish Water and private industry are setting up public-private partnership, private finance initiative and venture organisations. It is clear that the business lobby is circling, waiting to get the guaranteed profits of Scottish Water. That is at the root of the problem, and that is why vigilance is needed.
Those of us who are opposed to water privatisation need to ensure that the public know what is happening and that the Executive does not get away with hiding it behind measures such as the 2005 act. If water is a basic human right, it should not be sold for profit. That is an ideology to which I am happy to subscribe.
Today we have heard members speak in support of keeping Scottish Water public, and against privatisation or mutualisation. I would like to introduce a further theme: democratisation. Scottish Water is compared with and benchmarked against the privatised companies south of the border, but there is no need for us to measure our vital water industry solely against water companies that were established by arbitrary acts of privatisation nearly 20 years ago.
The purpose of keeping Scottish Water public is to manage a public good in the public interest. In that respect, we could learn a lot from the Swedish approach. Stockholm water—Stockholm Vatten, or SV—has as its mission statement
"to meet the needs of consumers for water services; and to contribute effectively to … sustainable development".
Among its goals are satisfied customers, resource efficiency and a healthy environment; returning a profit to shareholders does not feature. Stockholm Vatten is owned directly by the city of Stockholm and, although not national in scale, it serves a million people. The composition of the board and consultative groups assures active participation by service users in the decisions that the organisation takes. Despite its explicitly social and environmental remit, in 2004 SV was delivering drinking water at less than half the price at which it is delivered in most European cities.
All too often the public sector is criticised as an inefficient, unproductive behemoth, as compared with a lean, efficient, responsive private sector. There has been enormous pressure at global level to create a global water industry. One third of all World Bank loans are dependent on privatisation; huge amounts of United Kingdom and other international aid have gone into developing private water supplies around the world. A frequent claim is that, under the general agreement on trade in services, Governments can be prosecuted by the World Trade Organisation for disallowing private sector attempts to take over essential public services. Critically, however, privatisation of water has proved such a political hot potato that the European Commission has announced that it will exempt water from the new GATS. Sweden is subject to the same EU regulations and directives as Scotland. The same is true of the Netherlands, where in 2004 a law was passed banning private provision of drinking water.
Another reason that we should be wary of benchmarking Scottish Water too much with English water companies is that often they are not English water companies. Thames Water was owned by the German utilities giant RWE until last October, when it was sold to Kemble Water Ltd, which is a consortium led by an investment fund that is run by the Australian Macquarie Bank. Likewise, Wessex Water is owned by YTL Power International of Malaysia. Prior to that, it was the property of Enron. Are those the models that we wish to emulate?
I say to Murdo Fraser, do we want to compare ourselves with Enron, a byword for failure and corruption, or with the best in Europe? The choice is ours. I, for one, choose to support keeping Scottish Water public and keeping control of our water in Scotland, rather than abandoning it to a boardroom in Sydney or Kuala Lumpur or to faceless shareholders. With the advent of the Scottish Parliament, we have an unprecedented extension of democracy in Scotland. Let us use our powers to retain democratic control of our water supply, to protect the environment and to protect the interests of the customer.
I am delighted to take part in this morning's debate. I reaffirm the Labour Party's commitment to keep Scottish Water in public ownership and under public control.
Will the member take an intervention?
No—I ask the member to let me get started.
In 2003, Labour and the Liberal Democrats agreed in the partnership agreement to retain Scottish Water in the public sector. The partnership agreement committed the Scottish Executive to invest in Scottish Water. That commitment has been divided into two sections. There are five objectives in the essential category: to improve the quality of 530km of rivers and coastal waters, to improve the quality of drinking water for 1.5 million people throughout Scotland, to tackle constraints on new developments, to take action on odour from 35 waste water treatment works, and to remove more than 1,100 homes from the risk of sewage flooding. This morning, I want to concentrate on the third and fourth of those: odour nuisance and new developments.
The member started by talking about privatisation. Can she explain why the Executive's amendment would remove the clause in the motion that commits Scotland to a public water system? Can she answer the question that was directed at Andrew Arbuckle—mutualisation, yes or no? Is she prepared to rule it out?
The member should ask the Executive about its amendment. I am saying clearly that we are committed to retaining Scottish Water in public ownership and under public control.
By we, do you mean the Labour Party or the Scottish Executive?
I would like to move on. The member may not find the issues that I want to discuss quite as crucial as that which interests him, but I think that they are important, because they relate to the service that Scottish Water is delivering. Although I want to keep Scottish Water under public control, I have concerns about the way in which it is being operated.
My first concern relates to odour nuisance. I make no apologies for citing a constituency example. Mr Montgomery, a constituent of mine in Linlithgow, lives a few hundred yards from a water treatment plant. He also runs his business from his house. Since the summer of 2005 he has experienced huge problems of fly infestation and, especially at the moment, of odour. Despite repeated complaints to Scottish Water, only short-term solutions have been found. The odour problem is now worse than ever.
Will the member give way?
I want to finish making my point, which relates to an issue that the member raised earlier.
Despite repeated complaints and support from the local authority, a water treatment specialist and even Scottish ministers, Scottish Water appears to think that one individual's complaint is not worth worrying about. Given that Scottish Water has not yet solved the odour problems that have been caused by the Seafield treatment plant, perhaps the issue is not that my constituent is one individual, but that Scottish Water does not see dealing with odour as a priority. It should be a priority.
I am also concerned about issues relating to development. In areas such as West Lothian, where there has been substantial house building, we need to ensure that development is not held up by problems with water supply and that the burden of providing an additional water facility is not placed on local villages. Villages are being overdeveloped because developers are required to contribute to the provision of water services.
We need to look at the strategy and work practices of Scottish Water. Unlike the Tories, who would use any excuse to privatise it, I still believe that it should remain in the public sector. The minister has reaffirmed the Executive's commitment to keep Scottish Water in the public sector, and that is to be welcomed. People in Scotland should be in no doubt that the Labour Party will invest in our water system and keep it accountable to the people, through the Parliament.
I welcome the opportunity to speak in this debate and to reaffirm not only that the partnership agreement between the Liberal Democrat and Labour parties in the Parliament commits the Scottish Executive to continuing the public ownership of Scottish Water but that the Liberal Democrats are firm in their opposition to the notion of privatising our water supply.
Will the member give way?
If the Greens want to intervene in speeches, they should realise that only by ensuring that their debates are of a proper length will members' speeches be long enough to take their interventions. I will not take any interventions from the Green party in this debate.
The arguments for privatisation do not make sense. For a start, Scottish Water compares favourably with other UK providers. It is expected that, in three years' time, Scottish Water's water and sewerage bills will be the third lowest in the UK—and that is despite Scotland's rural nature, which would be badly catered for by private companies. Under the current regulatory framework, which is based on the public ownership of the water supply and affirmed in the Executive amendment, the Executive is charged with providing a leading role in setting objectives for Scottish Water.
We need look only at the figures to realise how successful the Executive's approach has been. Under the current arrangements, running costs have already fallen by 40 per cent, which has meant an average saving of £200 for every household in Scotland. Domestic charges are falling in real terms, and non-domestic charges should fall by 6 per cent before the end of the decade.
At the same time, efficiency has increased by 20 per cent as a result of targeted investment and better maintenance of pipes, sewers and treatment works. Moreover, water quality has also improved, with 99.56 per cent of samples in 2005 meeting the highest EU standards.
Of course, that is not to say that Scottish Water does not face challenges. After decades of underinvestment, there is much to be done. For a start, the organisation must continue to rebuild and replace worn-out infrastructure, and special attention must be given to water leakages. Scottish Water's delivery plan commits it to a 50 per cent reduction in leakages by 2010. It is vital that that commitment is met.
Customer service must also improve, to ensure that standards across Scotland are consistent. I acknowledge that issues have arisen over the WIC's role with regard to customers. Scottish Water must be customer focused, although it must also bear it in mind that its customers are not just the individuals who turn on their taps or flush their toilets, but communities. It plays an important role in that respect and it needs to address a number of problems about how it responds to communities' concerns.
I have a long list of problems with Scottish Water in my constituency. For example, Springfield, which I used to represent on Fife Council, has suffered from a problem with sewage smells for many years. Although a solution had been agreed before I stopped being the councillor for Springfield, it seems to have disappeared. Sewage smells are still a problem in the area and, despite the fact that dealing with such problems is one of its priorities, Scottish Water has simply failed to act in this instance.
Scottish Water and Fife Council are arguing over responsibility for dealing with a leak on Largo Road in St Andrews. Surely they should just get together and sort the problem out. Moreover, there have been endless problems in the east neuk, particularly in St Monans, Cellardyke and Crail. In Kettlehill, the small matter of installing the right water pressure valve to stop leakages has still to be resolved. Scottish Water needs to take into account various issues in respect of its community role, and I hope that the minister will comment on how to ensure that Scottish Water responds more positively to local communities' concerns.
Although the Scottish Executive's public sector model for Scottish Water has led to significant improvements, that is not to say that the same model should be in place for ever. Indeed, other public sector options might emerge that ensure that Scottish Water remains publicly owned but give it more freedom in the longer term. I am not ruling anything like that out. An opportunity for mutualisation within the public sector might become available, but I certainly do not want the type of private sector mutualisation that the Conservatives are suggesting, which would only make Scottish Water ripe for private sector takeover.
Although I did not speak in the preceding debate, I am very glad I sat through it, because I have been very interested in the contrast between the two. There was a lot of consensus in the chamber on green procurement, but in this debate the only consensus that we have reached is that something is not right with Scottish Water.
Many parties in the chamber share the view that the way in which Scottish Water has been structured economically makes it ripe for privatisation in the long term. In that respect, I feel myself agreeing with some of the views that have been expressed in the Greens' motion and in speeches made by Scottish National Party and Scottish Socialist Party members. Even more interesting, members of the Executive parties have made a number of strong comments on the matter. They have been willing to stand up and profess their support for retaining Scottish Water in the public sector and under public ownership, but they have expressed concerns and made their own projections about what will happen in the future.
The fact is that the current governance arrangements for the water industry in Scotland were introduced to meet a perceived problem at the time and can only now be seen as a transitional measure. Everyone in the chamber agrees that a different solution must be found. Indeed, even Iain Smith seems to believe that the current arrangements are transitional.
The water industry is different things to different people. To many in the Labour Party, it is a totem of public ownership over which they will argue for ever more. To customers, it represents a redistributive taxation system that overcharges some to support others. Well, I know people in Scotland who need support to meet their water charges. The cross-subsidy system, which has resulted in business water users being charged £44 million too much, is a ball and chain for large areas of the Scottish economy and should be dealt with urgently.
The problem of development constraints and the failure to establish a structure that allows investment to take place at the necessary pace and in the necessary areas is not only preventing economic development in certain places, particularly in the east of Scotland, but restricting our ability to conform to certain environmental requirements that we struggle every year to meet.
Will the member give way?
No.
Something needs to be done about Scottish Water. Many hold the straightforward view that it is ripe for privatisation. However, under the option offered by the Conservatives, the Scottish water industry can be retained in the service of its customers without becoming a bundle of shares to be sold around the world. We need a sound water industry. To that end, we must take action to free it from the dead hand of government and ensure that it gets the necessary resources from the capital markets to develop as it needs to.
Scotland needs a strong water industry that is secure in the long term. That can be achieved only by moving Scottish Water out of public ownership and into the mutual model that has succeeded so well in Wales. We must get together to work towards that concept now.
I congratulate the Greens on securing this very important debate. I can confirm that the absence of an SNP amendment means that we will support their motion at decision time.
The debate has highlighted a number of important points and illustrated a number of fundamental flaws in members' thinking. Perhaps the most fundamental is the idea, which emanates from the Conservative benches, that private ownership is good and public ownership is bad. Equally, we should not imagine that the reverse is necessarily the case. Just as the public sector is capable of success and failure, the private sector is also capable of success and—something that is less seen—very significant failure. Indeed, when there has been a crossover between the two—for example the involvement of the Capita Group and Electronic Data Systems as major contractors to the Government down south—the private sector has failed massively to deliver.
However, does such an example tell us that when the private sector conducts its private business and does not interface with the public sector it is as capable of making mistakes as the public sector? The question—it is important that we ask questions—is whether people in the public sector are capable of delivering good financial performance, meeting public objectives and supporting the people of Scotland. Of course, the answer is yes. We simply have to choose structures that make that possible.
Sarah Boyack said that the Labour manifesto has not been written yet. Oh dear. We thought that the Labour Party campaign was not going too well, but we now realise that its state of preparation is even poorer than we imagined. It is okay that Labour's manifesto has not been published yet, but the fact that it has not even been written shows the extent of the challenge that Labour faces. I hope that, in her closing remarks, the minister will nail her colours firmly to the mast, as her party's back benchers have done and as I think the Liberals have done—although Iain Smith was a little equivocal—and say that the future of Scottish Water lies in the public sector.
I am happy to be unequivocal—we will ensure that Scottish Water stays in the public sector. What is the SNP's policy? It has not even lodged an amendment to the motion.
We support the Greens' motion, which advocates keeping Scottish Water in the public sector. We are with the Liberals on that—it is an area of broad agreement, although we might differ on matters of detail.
The Tories talk about service to customers. Aye, but the whole point is that the water industry provides an infrastructure that services public policy as well as private customers. It is unlikely that we would have two infrastructures for water delivery, which would involve two sets of pipes going all over Scotland. That is why the water industry is different from some other industries that have been privatised.
I want to raise some constituency issues. I have mentioned the case of Banff and Buchan College before. A hotel in my constituency has just received a bill for £35,000. Again, that was the result of inaccurate and incomplete meter reading by the private sector company that was contracted by Scottish Water.
We warmly welcome the fact that, in Scottish Water's strategic plans, developments must be supported. That is good. My colleague John Swinney has been banging on about that for some considerable time. However, we must address how capital funding takes place and we must get from the minister a sincere assurance that Scottish Water will stay in the public sector. If she fails to make that clear, all protestations of Labour's support for Scottish Water will fall on deaf ears.
Let me begin by quoting from the Scottish Executive's amendment, which
"welcomes the substantial improvements that have been made in Scottish Water's performance, all of this having been achieved while keeping Scottish Water in the public sector … and affirms that Scottish Water operating in the current regulatory framework will go on to deliver further improvements in this vital public service."
Our position could not be clearer, as the speeches by Labour back benchers such as Maureen Macmillan and Mary Mulligan have affirmed. Iain Smith spoke for the Liberal Democrat party. It is entirely obvious what the Scottish Executive amendment means.
A number of members have disputed the success of Scottish Water over the past few years, but the company deserves to be congratulated, which is why our amendment welcomes the huge progress that has been made. Scottish Water is not a failing company or one that has not received clear directions on sustainable development. It is a public sector company that works within a regulated framework and which is delivering for Scotland. Our policies and our effective regulation mean that Scottish Water is delivering improved performance for less money.
The statistic that most people in Scotland care about is that Scottish Water's average household charge in 2006-07 is £287, which is £7 less than the equivalent charge in England and Wales. By 2009-10, the difference will be even greater.
Will the minister take an intervention?
No, thank you.
Andrew Arbuckle was absolutely right to highlight the contrast between investment now and the historical lack of investment, when water services languished as a low priority for cash-strapped regional councils.
I do not accept that the current system was set up deliberately to facilitate privatisation. Over the past few years, three companies have been merged into one. We have given Scottish Water a massive investment target and other, detailed targets. Maureen Macmillan was right to highlight efficiency and the importance of tackling leakage. The Water Industry Commission has set specific leakage reduction targets for Scottish Water, under which it must close 50 per cent of the gap between its current performance on leakage and the economic level of leakage by 2010 and, in the interim, reduce that gap by 16 per cent by 2006-07 and by 25 per cent by 2007-08. Those are tough targets. If members want us to go further, faster, we must pay more or rein back other projects for which there is support in the Parliament. The challenge for the next investment regime is to pick up the excellent points that Maureen Macmillan made about the need to ensure that we make progress on water conservation.
I think that we are delivering on sustainable development and I do not accept the Greens' argument that Scottish Water is not tackling the issue. The company is taking highly specific measures. Efficiency gains must be linked to sustainable development. Why should we not use innovative techniques to renew water mains so that minimum disruption is caused to customers? Such techniques allow 36km of pipes to be laid per week in the busiest periods. Why should we not cluster similar projects instead of wasting resources on the design of unique projects? Why should we not have rigorous project management to achieve efficient and effective solutions? Why do we not implement no-dig solutions for renovating sewers, which cause communities less disturbance and which save time and money?
Sustainable development principles and economic efficiency can be combined in numerous ways. That is why the Scottish ministers' directions require Scottish Water to deliver its aims sustainably. However, we must ensure that economic regulation—
Will the minister take a 12-word intervention?
Let us count how many words the member uses.
Given the 100-year life of water infrastructure, over how long should the funds to pay for it be paid back? I have run over by two words.
You are in your final minute.
The SNP has made its position no clearer this morning. We have had three different speeches from SNP members, none of whom has lodged an amendment to the motion. I will take no lectures from a party that has been comprehensively defeated every time it has brought forward its alternatives.
We have made clear our financial position and our investment programme is under way. During the first session of the Parliament, we set a £1.8 billion investment programme; now it is a £2.5 billion programme. The Executive has committed to ensuring that that investment takes place. Jim Mather made an extremely casual comment about the implementation of EU directives, which are in place to improve the quality of our environment. We need to meet them.
Scottish Water and the framework under which it operates—whereby public sector control by the Scottish Executive is combined with economic regulation—are unique. The system that is in place gives us the best of both worlds. Ministers are able to set policy objectives that have been approved by the Parliament, while economic regulation ensures that we can afford the necessary investment. It is important that we draw those two aspects together. Excellent environmental improvements are being delivered because Scottish Water is operating more efficiently. That is good news for the environment and for customers.
After this debate, what is the future for Scottish Water? We already knew the Tories' position: they want to privatise Scottish Water. For this morning's debate, they have put forward the mutual model that is used by Welsh Water. The Tories' thinking was given away in Murdo Fraser's speech, in which he described Welsh Water as the top private water company in the UK. When Murdo Fraser talks about the mutualisation of Scottish Water, he is talking about it becoming a private company. That is what mutualisation means to him.
The remarks of Rob Gibson and Jim Mather about the flaws in accounting and in the operation of the economic regulator are to be welcomed. The fact that the regulator's primary focus is economic means that environmental and social issues are not taken into account.
Frances Curran's wise counsel was that we must remain vigilant to the vultures that are circling above Scottish Water, which recognise the easy pickings that they could get from a privatised Scottish Water.
Stewart Stevenson identified the crux of the debate—it offers us an opportunity to nail our colours to the mast. Will Scottish Water be a private or a public company? That is what the debate is about.
What did members of the Executive parties tell us? Andrew Arbuckle gave us a history lesson, in which he went back to the situation in Fife in the 1960s.
Labour members—and Iain Smith—talked about the history of the past four or eight years and the content of the partnership agreement. Why was that? Alex Johnstone made a good point when he said that the current arrangements seem to be transitional. The Executive is still not making clear what the future holds.
Sarah Boyack said that she had nailed her colours to the mast in the Executive amendment. The amendment acknowledges the past achievements of Scottish Water while in the public sector. It is right that we celebrate those achievements. However, it is crucial that although the amendment acknowledges Scottish Water's history of success, as does our motion, it does not include a commitment to keep Scottish Water in public ownership and under public control. Instead, it suggests that the Parliament
"affirms that Scottish Water operating in the current regulatory framework will go on to deliver further improvements in this vital public service."
We all know that Scottish Water will do that—it has a plan to do so until 2010. However, what will happen after that? What is the future for Scottish Water? What is the Executive's long-term vision? That is the issue.
Mark Ruskell put it well in his four-word intervention during Andrew Arbuckle's speech—he must hold the record for the shortest intervention—when he asked, "Mutualisation: yes or no?" Andrew Arbuckle referred to comments made by Ross Finnie, who I think was reported in The Scotsman as saying that it would be an unwise politician who ruled out options for the future. The crux of the matter is that the Executive refuses to rule out mutualisation.
Will the member give way?
I am sorry, I do not have enough time.
In practice, mutualisation means that money is borrowed not at the cheaper rates that the Government can get through the public sector borrowing requirement but at the more expensive rates of the finance markets. In all mutualisation models that have been proposed, money is borrowed privately and not through the PSBR. That is the division between public and private. We must ask whether we want a company that is accountable to the people of Scotland, which borrows money through the PSBR, or a mutual or private company that is ultimately accountable to shareholders or to the bankers who lent it money.
Will the member give way?
I am sorry. I do not have enough time.
Welsh Water, which was held up as an example by Murdo Fraser and other members, employs 152 people. The rest, who work effectively to provide a water system for Wales, are employed by various consortiums in the private sector. An industry that employs 3,000 people in the private sector is not a model of public service delivery by the public. The mutual model in Welsh Water is a Trojan horse—we should be clear about that.
As Mark Ruskell, Rob Gibson and others said, there are problems with the regulatory system and how it accounts for social and environmental factors. Many members talked about problems to do with housing, and Maureen Macmillan mentioned smell—
I did not.
Sorry. That must have been another Labour back bencher.
The fact that the WIC is, ultimately, an economic regulator is a serious problem. Whether there are tensions with SEPA about drinking water or with the Scottish ministers, the WIC is ultimately accountable to the Competition Commission for economic regulation and does not have the wider social and environmental remit that it should have.
Water is not just a commodity like any other commodity. Our water industry is a vital resource, not just for new building developments but for human health. That is why, when the Victorians installed the water infrastructure that we now seek to replace, they did so as a public enterprise. The civic fathers in Glasgow responded to the concerns of medical officers such as James Burn Russell. We need to match the Victorian civic infrastructure with a new public infrastructure.
Water is the classic sustainable development issue because it concerns the economic, social and environmental health of our nation. It is too important to be run for the benefit of shareholders and bankers. As a result of massive public opposition to a sell-off, the industry in Scotland remained in public ownership when the industry south of the border was sold off. Water must remain public for the future. Parties and the Executive must nail their colours to the mast. I urge members to do so by supporting the motion.