Official Report 1017KB pdf
The next item of business is a debate on motion S6M-18680, in the name of Richard Leonard, on behalf of the Public Audit Committee, on the 2022-23 and 2023-24 audits of the Water Industry Commission for Scotland. Members who wish to speak in the debate should press their request-to-speak buttons. I call Richard Leonard, on behalf of the Public Audit Committee, to speak to and move the motion.
15:40
Being the convener of the Public Audit Committee is a privilege, and it is one which I will never take for granted. So I am grateful to be opening this afternoon’s debate on the committee’s findings, on our conclusions, from our extensive scrutiny of the Auditor General’s two section 22 reports following his annual audits of the Water Industry Commission for Scotland between 2022 and 2024. At the very start, let me put on record the thanks of the committee, past and present, to the clerks, past and present, and to the entire support team for the hard work that has gone into the production of this report.
What we have exposed is an extreme example, in the words of the Auditor General, of governance and financial issues falling
“far short of what is expected of a public body”.
And as we gathered evidence over the course of a year, we uncovered a catalogue of failures by WICS, by its former chief executive, by its board and by the Scottish Government. All of them—all of them—failed to meet the core minimum standards that are required of them. And by their action, and by their inaction—conscious choices both—they all contributed to an extraordinary and flagrant misuse of public funds.
Significant sums of public money—our money, the people’s money—were splashed out on expensive training courses for senior staff, on unauthorised Amazon gift vouchers to all staff, and on excessive and unreceipted hospitality claims, or “business entertaining costs”, racked up by the most powerful staff in the organisation. Time after time, the audits uncovered fundamental weaknesses in financial controls, where expenses claims were paid out with missing or non-itemised receipts. At one point at the start of 2023, unbelievably, the limit per head for spend on these “business entertaining costs”, including meals and alcohol, was done away with completely.
On that last point, does the convener agree that the committee never had an adequate explanation as to why the limit was removed?
I thank Graham Simpson, who has been a very active member of this inquiry by the committee. I agree with him that there are still many unanswered questions.
We revealed, over the course of the inquiry, both a careless neglect and a wilful indifference toward policies and procedures for things like the procurement of services like legal advice, recruitment searches and the booking of business-class air travel. And of course, this was all from the body that was created in statute by this Parliament to
“promote the interests of Scottish Water customers to ensure long-term value and excellent levels of service.”
You could not make it up.
So this is, rightly, a matter of serious concern for this Parliament, but the fundamental question which has to be addressed today, which must also be a matter of serious concern to this Parliament and to this Government, is not just that these things happened; it is that these things were allowed to happen. Where was the challenge to these behaviours by the board of the Water Industry Commission for Scotland? Where was the challenge from the Scottish Government’s sponsorship team? And how on earth was it that WICS drifted into a culture of spending public money in ways that were directly and blatantly in breach of the rules of the Scottish public finance manual? I know that the Cabinet Secretary for Climate Action and Energy accepts this, and the new leadership team at WICS accepts it, too.
But let me turn to some of the most egregious examples identified by the audits. It has been widely reported that a senior member of staff attended a training course at the Harvard Business School in Boston, at a total cost of over £77,000. What has been less widely reported is that there was no competitive tendering exercise; that there was no business case made and no value-for-money case made; that there was no lock-in period for that member of staff involved, so they could just have left their job the day after the course was finished; and that, even though it breached the spending threshold of £20,000, there was no Scottish Government approval sought, either. In fact, when it was applied for retrospectively, we were told by a senior civil servant that
“there was no material benefit ... in challenging”—[Official Report, Public Audit Committee, 21 March 2024; c 13.]
the expenditure, as the money had already been spent.
The Government has since backtracked on this, but this was not an isolated incident. Freedom of information requests later revealed that it was common practice for senior staff at WICS to attend expensive management training courses, in locations as far flung as not only North America but South America, too, where once again the total cost exceeded £70,000. Now, do not get me wrong: in our report, we recognise the importance of staff training and development to any public sector organisation. Of course we do, but this excessive expenditure was clearly unwarranted, unauthorised and unpardonable.
Let me turn to another wider lesson from what happened at WICS. The commission is a small public body. At the time of these audits, it employed just 25 members of staff. We heard that the Scottish Government sponsorship team did not view WICS as “a high-risk body”. In fact, the Government’s director general for net zero himself told us that he thought that, out of all the public sector bodies he is responsible for, WICS would have been
“the one to operate in a highly efficient way”.—[Official Report, Public Audit Committee, 21 March 2024; c 25.]
This proved to be nothing less than a monumental error of judgment.
The work undertaken by Audit Scotland prompted WICS to carry out its own reviews into its financial transactions and its governance. It forced the Scottish Government to commission further independent reviews into these areas and into its own sponsorship oversight. But let me make the point again: the members of the WICS board who presided over this need to take a long hard look at themselves and ask if they performed the job and if they set the standards of corporate governance we expect and demand in the public sector.
In the report, we also make other recommendations, which I am sure other members of the committee will refer to. But let me be absolutely clear: WICS may be a small body, but the lessons to learn here are big ones. They are about governance, accountability and the proper use of public money. These lessons must be applied across all of Scotland’s public bodies and not just at WICS.
At the heart of a properly functioning democracy must be accountability, and accountability demands transparency. Where that is in short supply, it is the job of this Parliament to force it out of the shadows into the light. That is what the Public Audit Committee has done with this investigation and with this report. These are matters not only of public interest; these are matters of public trust. On behalf of the Public Audit Committee, I move the motion in my name.
I move,
That the Parliament notes the conclusions and recommendations contained in the Public Audit Committee’s 1st Report, 2025 (Session 6), The 2022/23 and 2023/24 audits of the Water Industry Commission for Scotland (SP Paper 783).
15:50
I am grateful for the opportunity to speak about the matters that are raised in the Public Audit Committee’s report on the Water Industry Commission for Scotland, or WICS, as I will refer to it from now on. I commend the committee for its scrutiny of the issues and for its report, which I found to be balanced and constructive.
Before I get into the substantive content of the committee’s report, I want to be absolutely clear that nobody was more disappointed by the issues at WICS than the Scottish ministers. It bears restating that the cases of inappropriate expenditure were completely and utterly unacceptable. We rightly expect far higher standards from our public bodies. To help to address those issues, we commissioned and published reviews of WICS’s financial governance and culture and of the Government’s sponsorship function. My officials also provided evidence to the committee across three sessions.
As accountable officer during the period in question, the former chief executive of WICS had responsibility for the propriety and regularity of the organisation’s finances. We have learned that, regrettably, that responsibility was not always met. Similarly, the board of WICS failed to meet its responsibility to ensure that appropriate governance arrangements were in place, which was inexcusable.
I make this intervention as a member of the Public Audit Committee rather than as its deputy convener. What do the failures of governance at executive or senior management level and at board level say about the sponsorship relationship between the Scottish Government and WICS? What does it say that such irregularities were allowed to happen year after year? Who in the Scottish Government was paying attention to what was happening at WICS? Why was no attention paid to that?
Jamie Greene makes a fair point, which is one of the reasons why we carried out a review of the sponsorship arrangements between the Scottish Government and public bodies. In the WICS situation, the Government was found to be lacking when it came to the sponsorship arrangement and the feeding back of information from the individual in the Government who was responsible for that arrangement to Government ministers. The review showed that the process was too reliant on one individual. One of the changes that will be made is that multiple people will be involved in the sponsorship arrangement. That is a fundamental change.
Ministers were not aware of the issues until the Auditor General’s first section 22 report and the freedom of information releases in the months that followed. On publication of the first section 22 report, officials—alongside the leadership of WICS—took immediate action to drive improvements and hold WICS to account for the delivery of its action plan. As we discovered further examples of completely inappropriate expenditure, it became clear that a more forensic investigation should be undertaken. One key conclusion of our review is that compliance and cultural issues were long standing and deep rooted. As we said at the time, the tone from the top needed to be reset, and we acted quickly to do that.
In July 2024, we appointed two experienced interim board members, neither of whom had any previous connections with WICS. One of those interim members, Ronnie Hinds, became interim chair last October, and the recruitment of a permanent chair is under way. I put on record my personal gratitude to Mr Hinds and his fellow board members for their hard work in steering WICS reforms.
To the credit of the new board and leadership team, significant progress has been made in redeveloping the organisation’s structures and governance and changing its culture. Our role review has resulted in a restructured senior team. A permanent chief executive is now in post, and new directors will join WICS in the autumn. Crucially, financial policies and processes have been fully reviewed and the ambiguous and outdated rules of the past have been removed. I hope that those measures will support an improved culture of compliance.
Has there been any review of other organisations to see whether there have been other breaches of policies and processes similar to those that we have seen at WICS?
As I said, the sponsorship arrangements between the Government and public bodies have been completely reviewed. As part of that, we are ensuring that there are plural oversight relationships and that there is communication about what is happening at board level in all public bodies. If the member wants to ask about any specific public body, he can write to the minister concerned to get information. I have oversight of WICS.
Ministers have reflected on the Scottish Government’s role in relation to the issues at WICS. We have formally reviewed the sponsorship relationship and very much agree with the committee’s conclusion that it was, unfortunately, nowhere near as robust as it should have been. The issues at WICS should have been brought to our attention sooner. We recognise that officials should have taken a more proactive approach to potentially novel or contentious expenditure and, similarly, we recognise that the sponsor team should have been more proactive in supporting the WICS board to consider all the available options in relation to the departure of the former chief executive.
We have acted decisively to make changes, including by addressing all the actions that were identified in the internal sponsorship review. That has included publication of a revised framework between Scottish ministers and WICS in order to make the respective roles and responsibilities clearer and to ensure that there is a systematic approach to engagement, rather than an overreliance on any one individual. My officials regularly attend WICS board meetings as observers. We have further increased the capacity of the sponsorship team for 2025, and all its members have completed the required training.
One of the committee’s key recommendations was that a robust whistleblowing policy should be put in place for staff. It is one thing to have a sponsorship team engaging, but it is critical that that team can hear from staff who feel able to report matters without fear of losing their jobs.
It would be helpful if you could bring your remarks to a close soon, cabinet secretary.
Sarah Boyack makes a very good point. One issue that was uncovered was that those in the lower ranks at WICS were afraid to speak out. That was part of a culture that was allowed by senior management and that flourished unchecked by the board.
All those measures are fundamental to ensuring that the relationship between the Government and WICS functions properly and that any support is accompanied by critical challenge. I note that the Auditor General for Scotland intends to monitor WICS closely and to look at the sponsorship of public bodies more broadly. We welcome that scrutiny.
I wholly endorse the committee’s findings and thank its members for their important scrutiny. I recognise the positive steps that my officials and the new board and senior management team of WICS have taken in order to address historical issues, and I assure the Parliament that lessons have been learned.
15:58
It gives me no pleasure to make this my first speech after recess.
I thank the committee for its forensic analysis of what went wrong at WICS. I welcome the convener’s contribution and the cabinet secretary’s words, which recognised the significant failings at the organisation.
The committee’s report catalogues a litany of errors that, at best, pushed the limits of the financial rules and that were, at worst, fraudulent. From a public viewpoint, there was clearly a massive waste of taxpayers’ money, which was used to line the pockets of quango fat cats who acted without fear of being caught or had some idea that they were untouchable and were simply taking what they were entitled to. From Mulberry wallets to lavish dinners, the culture of entitlement was rife. It is that spurious waste of taxpayers’ money that continues to undermine the confidence of the Scottish people in this devolved Government.
When those activities came to light and the chief executive was forced to resign, the Government continued to cost the taxpayer money with an ill-thought-out severance package. Audit Scotland said that that decision was taken too quickly and without considering the wider options. He should have been sacked for gross misconduct, not given a package to leave.
In Audit Scotland’s scathing report and in the committee’s report, we can see a culture of misspending, expenses claims that do not fit with policy and a flagrant disregard for ensuring benefit for the public purse. Audit Scotland found that WICS demonstrated poor governance over its finances, that there was little to no due process and that there was no concept of ensuring value for money. The way that senior officials used public money was simply “unacceptable”.
Audit Scotland also found that WICS needed to do more to ensure that it was delivering best value for money to the taxpayer. The board seemed to be disengaged with the day-to-day operation of the organisation, and oversight was not happening at any level. People need to understand that board membership for organisations such as WICS brings with it serious responsibilities, which seem to have been overlooked. Spending decisions were made without consultation with anyone, and the chief executive and senior management did not seek sign-off for large items of expenditure that should have been discussed.
Policies were in place but were ignored by the senior management team. That is a shocking state of affairs for any public body to be in. However, the list goes on. The committee’s report criticised the Scottish Government for not intervening on the WICS training policy. The Government was aware of the high cost of training, including—let us not forget—courses at Harvard University, which included all flights and accommodation, and we heard today that it was business-class travel.
The committee notes that there have been
“significant weaknesses and failings in the Scottish Government’s sponsorship of WICS. These have led to a failure to ensure appropriate safeguarding of public funds.”
More public money has been wasted. The report goes on to further criticise the Government for appearing to encourage the chief executive to negotiate an early exit date. That meant that a full disciplinary process that would have examined a full account of the failings at WICS by the chief executive never happened.
Although the financial irregularities are bad enough, there were also significant failings in the culture of the organisation, with high levels of bullying being reported by staff. There was a poor work culture after Covid, and there were failings by management to address issues among the staff. All that speaks to a breakdown in the operation of WICS and to a failure in oversight by the Scottish Government. That has led to massive waste of taxpayers’ money and a decline in trust in our public bodies among the Scottish people. Responsibility for that lies solely at the feet of the Scottish Government.
Although the committee has received a helpful response from the new chief executive that accepts the committee’s recommendations and talks about enacting remedial policies to fix the financial irregularities, the Scottish Government’s assurances fall short. The Scottish National Party has created a quango culture of organisations delivering services that should be under the purview of the Scottish Government.
I invite Douglas Lumsden to tell me what was missing in my speech. What more would he like to see from me by way of answering any of the questions in the report?
The first thing that I would like to hear is an apology to the people of Scotland for all the money that has been wasted. WICS was under the remit of the Scottish Government, and the Scottish Government has failed in looking after the organisation.
I also asked whether you knew of any other organisations being reviewed. Perhaps some of them are not under your remit.
Always speak through the chair.
I would like to know whether the Scottish Government is doing a full review of all organisations to see whether such a culture exists in other places. Outside agencies are acting with impunity, and this devolved Government must either take control of outcomes or oversee them more robustly.
The cabinet secretary’s letter to the committee talks about establishing a peer-led sponsorship network. I suggest to the cabinet secretary that we might need a bit more than another talking shop. The narrative around WICS is not the only story of taxpayers’ money being wasted by this out-of-time Scottish National Party Government. Whether it is ferries, prisons, spin doctors or equality and diversity champions, time and again, the hard-earned money of hard-working Scots has been squandered. Quite frankly, it is a disgrace, and the Scottish public are well and truly sick and tired of seeing their cash disappear under the SNP’s watch. Only the Scottish Conservatives are offering commonsense solutions to the issues that Scotland faces. [Interruption.]
Some members think that money being wasted on Mulberry wallets is funny, but the people I represent do not find it funny at all.
[Made a request to intervene.]
The member is concluding.
That is set against the SNP Government’s never-ending preaching on what it thinks is best for the Scottish public. The cabinet secretary should hang her head in shame in coming to the chamber today and giving her response to the committee’s report, which highlights all too clearly the failings of this Government and its cosy network of quangos that deliver poor public service to the people of Scotland.
16:04
I thank the members of the Public Audit Committee for their work, and the clerks to the committee for their support.
This is a damning committee report. There is clear evidence from the Auditor General for Scotland that WICS and the Scottish Government consistently failed to lead by example in ensuring value for money due to significant weaknesses in governance, financial management arrangements and accountability. There was spending on overseas training courses costing more than £70,000 and Christmas gift vouchers bought without proper approval, and a culture that tolerated excessive hospitality and poor accountability. That matters to all of us, because Scottish Water is a publicly owned utility that people across Scotland depend on every single day. We should be able to take clean, affordable water for granted. It is vital that lessons are learned from today’s debate, that the Scottish Government is held to account for the failures and that the culture in WICS fundamentally changes. It is also important that other public bodies are made aware of the issues so that the failures are not repeated.
The areas that the committee investigated and the work of the Auditor General for Scotland are wide ranging. There was poor governance in WICS’s expenditure approval and weakness in its financial control. There is also the role of the Scottish Government’s sponsorship team, the role of the board and the departure of the former chief executive. This is about accountability and value for money. WICS is the organisation tasked with holding Scottish Water to account—what an irony. Its job is vital in that regard. WICS is there to determine the lowest reasonable cost that Scottish Water will have to incur to meet ministers’ environmental, quality and service objectives for the industry. WICS’s decisions must be consistent with the guidelines that are set by ministers in their principles of charging. The repeated failures that the committee has highlighted and that Audit Scotland identified need to be addressed urgently.
In a powerful opening speech, Richard Leonard highlighted the extreme examples of governance and financial issues. The Auditor General noted that WICS fell far short of what is expected of a public body. It is deeply concerning that the committee and the Auditor General also highlighted Scottish Government failures to hold the commission to account in decisions that involved expenditure that did not meet standards of value for money and accountability. Taxpayers’ money was being spent in ways that did not meet the Scottish Government’s guidance. We have had numerous debates during recent months about the Government wasting taxpayers’ money. Those huge failures must be addressed urgently.
We should be proud of the fact that we have a publicly owned water company in Scotland. WICS is meant to be the economic regulator for the industry and to promote the interests of Scotland’s water and sewerage customers. We should be using our time today to talk about Scottish Water, because it is key to producing high-quality clean water for our constituents across Scotland. However, affordable bills have gone up by inflation-busting increases of almost 10 per cent this year after 8.8 per cent last year and there have been large bonuses for senior staff who already have big salaries. There are concerns about the widening gaps between the wages of workers who do the daily work that keeps our infrastructure working and those on the top salaries. I was concerned to hear from Unison members about the fact that they are seeing privatisation by stealth and an increase in private contracts and tenders. We need support for concerned staff across the public sector who want to be whistleblowers. That was emphasised in the committee’s report.
We should also be talking about sewage. Research that was carried out by Surfers Against Sewage highlighted the need for more reliable data and monitoring of sewage outflows and the need for increased action on extreme weather events causing heavy rainfall and water shortages. As was discussed at First Minister’s question time today, we now have water shortages that are impacting on our constituents, farming and business communities.
That all means that WICS has to work properly by holding Scottish Water to account through value for money in the bills that we all pay. It means that WICS needs to deliver value for money and be accountable. The committee’s report highlights significant repeated failures by WICS and the Scottish Government. The lessons need to be learned, not just by WICS but across the public sector. How did this happen? The committee’s recommendations need to be implemented urgently and consistently across the public sector.
16:09
I join members in thanking the Public Audit Committee. I am not a member of the committee, although I sit on the Scottish Commission for Public Audit. The work that the Auditor General for Scotland has done underlines the importance of Audit Scotland and the AGS. I thank the convener for his powerful comments at the beginning of the debate.
Reading the committee’s report, the word “egregious” springs to mind. At the root of a raft of bad decisions by WICS, there was clearly a lack of focus on its core role as a public body and a deep cultural problem within the organisation. WICS had been encouraged by the Scottish Government to expand its remit into acting as a private sector consultancy on the international stage. Unfortunately, with that came a total indifference to upholding the standards that are required of a public body. There should have been no confusion at all on the part of the chief executive officer, the chair and the board—they should all have known better. The Scottish Government’s arrangements should have worked to rein in excessive and inappropriate spending from day 1, and the Government should have heard the alarm bells ringing far earlier.
The fact that the chief executive officer at the time resigned to avoid scrutiny by the Public Audit Committee is distasteful—that his pay-off cost the taxpayer more than £100,000 even more so. The £70,000 Harvard training courses, funded masters in business administration, £200 dinners and Christmas gifts are all symptoms of an organisation that had lost its sense of responsibility to act in the public interest and deliver value. The whole affair has undermined trust in the regulator and has been damaging to the water industry in Scotland more broadly. However, I am pleased that lessons have now, belatedly, been learned. The organisation has been refocused back on to its public role and will move forward, with further monitoring from the Auditor General.
As Sarah Boyack outlined, now is the time for a renewed focus on the water industry and its regulators. It is 20 years since the Water Environment and Water Services (Scotland) Act 2003 was passed, which established WICS. We are also in the early days of a climate crisis that will be driving huge investment decisions for generations to come. The director general net zero told the committee that WICS provides
“the impetus to deliver on efficiency savings, reduced taxpayer bills and the improvement of the asset”,—[Official Report, Public Audit Committee, 19 February 2025; c 68.]
but there is no fundamental reason why that impetus cannot come directly from Government, with no economic regulator in place. Arguably, WICS helped to bring a focus to Scottish Water in those early days, especially in reducing costs and improving performance. However, is it still fit for purpose? Why cannot that regulatory capacity be built within Government? Other states around the world regulate their nationalised utilities by Governments setting out formal agreements on performance, pricing and other obligations. They manage to focus on improving governance, robust auditing and citizen engagement, without an economic regulator. They manage to get the balance right between the necessary technical decisions and the more political choices.
When WICS was established, at a time when the Scottish Executive was flirting with privatisation, Ross Finnie, the Lib Dem minister, was keen on turning Scottish Water into a mutual, like Welsh Water—public on the outside and private on the inside. In effect, it would have been a public shell company with a business being operated by private contractors. I can see the benefit of an economic regulator in that context, but that is not a model that was ever fit for Scotland. Moreover, the context of the water industry has changed dramatically around the United Kingdom, even in just the past couple of years. With a water bill inevitable in the next session of the Scottish Parliament and further regulatory reforms coming in England, it is time to consider whether WICS is still fit for purpose.
It is a separate issue from the historical bad practice that the Auditor General has reported on, and it should remain so, but there are broader questions about the future of water industry regulation in Scotland, and we should not be afraid to discuss them.
We move to the open debate. I advise back benchers seeking to speak in the open debate that I require speeches of up to four minutes.
16:14
I begin by thanking my colleagues in the Public Audit Committee, and the committee clerks, whose hard work helped to produce the report. The report is about more than just one public body that has gone wrong; it is about trust—trust that public money is spent fairly and wisely and that Parliament can effectively hold public bodies accountable.
The report’s findings are worrying. For example, the spending of some £77,000 of taxpayers’ money on a Harvard Business School training course was not subject to proper assessment and control procedures. That is simply indefensible. That money could have been spent on our public services—on teachers or apprenticeships—rather than on a costly business course. That may sound like a small amount of money in the grand scheme of the Scottish Government’s budget, but it represents the yearly wages for three entry-level nurses. I am sure that we all know which of those options would offer better value for the public.
There were also incidents involving gift vouchers for staff being issued beyond agreed limits, non-compliant spending on recruitment, very generous hospitality with expensive meals and air travel, and staff pay-offs that were not properly authorised. Those were not simple mistakes or one-offs. They all point to the growth of a culture where responsible monitoring by the board was lacking and management oversight was weak or incompetent over an unacceptably lengthy period. That period ran into several years, during which neither internal nor external audit challenged breaches in either policy or processes. I would encourage the audit process to be revisited so that lessons may be learned to ensure that such a blatantly unacceptable situation does not arise again.
Households across the country are feeling the pinch of the cost of living crisis and cutting back on their outgoings, and they rightly expect public bodies to do the same. Instead, they have seen news reports of irresponsible spending and lavish entertainment. That is why the Public Audit Committee strongly recommended strengthening the WICS board, tightening financial and governance policies and ensuring robust whistleblowing protections.
I welcome the fact that the Scottish Government has listened and responded, but we must not grow complacent. WICS has revised its policies and brought in new board expertise, but vigilance is essential. I am pleased that updated policies will require any international consultancy work to receive ministerial approval and that both the Auditor General and the Scottish Government will continue to monitor WICS’s progress. Oversight cannot be something that we do once and then walk away from; it should be built into the culture of how public bodies are run.
As I stated in my introduction, the report is not only about WICS, as it also carries wider lessons. It is a reminder of why transparency matters and why Parliament must hold public bodies to account. It is also a wake-up call to the Scottish Government on deficiencies in its sponsorship model as it affects WICS. The sponsorship model must be proactive and alert so that potentially questionable practices are challenged at an earlier point.
It is vital that we remember that every pound of public money matters. We all know of the difficult financial situation that not only our Government but our constituents are in. As they are having to tighten their belts, it is more important than ever to reduce public bodies’ waste. The report’s message is clear: never again should we see this failure in oversight. The report lays bare failings at WICS, but it is also a worthwhile lesson for other public bodies and the Scottish Government on the need to reform and improve. We must ensure that the lessons are learned across the board.
Our public bodies must deliver value for the people of Scotland. The people deserve to have public bodies that are transparent, accountable and efficient, and I am grateful that they have a Parliament that challenges and holds our public bodies to account. The public deserve every penny of public money to be spent wisely and fairly, and that is the standard that we must uphold in this chamber.
I call Tim Eagle, who is joining us remotely.
16:18
I apologise for not being able to be present in the chamber for this debate. I intend to keep my remarks brief, as Douglas Lumsden outlined perfectly the many failings that are identified in the Public Audit Committee’s very well-written report on the Water Industry Commission for Scotland.
It is worth noting that this debate comes only a week after the Scottish Environment Protection Agency issued an alert warning that six areas of Scotland now face significant scarcity, with several areas in the Highlands and Islands region facing moderate scarcity and alerts. Although I appreciate that prolonged periods of drought are not things that this Government can control, fears about access to water in some of the most rural parts of Scotland are not helped when my constituents simultaneously hear that the people in charge of Scotland’s water have received taxpayer-funded bonuses on top of already good salaries and that the regulator that is supposed to have oversight of that is failing.
I received a response to a written parliamentary question by the cabinet secretary, Gillian Martin, which has left me somewhat shocked. In the Highlands and Islands, in July alone, 40.7 megalitres of water were estimated to have been lost per day due to leakages. That is more than 40 million litres of water lost every day. Since the last election, billions upon billions of litres of water have been lost due to leakages in my region, let alone across the rest of Scotland. That means that, while the Scottish Environment Protection Agency is telling the public to cut down their water use, Scottish Water is literally leaking out water.
How do members think the public feel when they know that, rather than infrastructure being appropriately fixed, large bonuses are instead being awarded? That is why the Public Audit Committee’s findings about Scottish Water’s regulator are particularly damning. The report highlights the extravagance of the Water Industry Commission for Scotland, including the spending of £2,600 on Christmas gift vouchers, hundreds of pounds on meals and alcohol, and more than £40,000 on items that did not meet the requirements of the Scottish public finance manual.
Audit Scotland summed it up perfectly in its 2022-23 report when it concluded that
“Value for money should be a key consideration for ... expenditure incurred by public bodies and the findings of the auditor highlight unacceptable behaviour, by senior officials within the Commission, in the use of public funds.”
Audit Scotland is right. Evidently, this was lost on those who were in charge at the Water Industry Commission for Scotland, but perhaps more worrying is the lack of oversight of all of that, which has been mentioned several times so far. It is evident from the report that far more oversight is needed, but, perhaps more broadly, it is about how much scrutiny other agencies and non-departmental public bodies require with regard to how they spend their money.
Although others will disagree with me, I am more and more convinced that, under this Government, Scotland has a culture of bloated quangos and a lack of proper oversight, whether it is in the Water Industry Commission for Scotland or the many other bodies that have been set up to take decisions instead of elected members. It is clear that more must be done to rein in and keep a check on those organisations.
16:21
I suspect that most of my constituents had never heard of WICS until this scandal erupted. Many more of them are now aware of this important regulator because of what they have heard in the media, but it is for all the wrong reasons. That is unfortunate, because WICS has a really important job to do.
Given what we now know, it is astonishing that the former CEO was at the helm of the organisation for almost a quarter of a century. I did not have a lot of interaction with WICS, but, as a member of the Net Zero, Energy and Transport Committee, I have been involved in panels where we questioned that organisation. At the time—and I think that other colleagues shared my view—I felt that there was a hostility to scrutiny and to questions, so perhaps that should have been a red flag.
I welcome the cabinet secretary, who has inherited a lot of this work, letting the Parliament know that lessons have been learned and changes have been made, but I share the concerns of other members, including Colin Beattie, that the approach cannot be short term. How can we be confident that this situation can never happen again and that it never happens in any other organisation?
Colleagues are right—today, we are looking not just at the culture of the organisation but at all the infrastructure around it. We have seen massive failings in governance and financial control. It is about greed and entitlement. Those people thought that they could go to their work and go out for dinner with their colleagues and cronies and spend hundreds of pounds on booze and fancy meals in luxury hotels and restaurants.
As we talk about this today, I am reminded that tomorrow is national food bank day. Many of our constituents, including many people who are in work, rely on food banks to feed themselves and their families. That is why people are angry when they hear about these kinds of scandals.
Colleagues have talked about the importance of Scottish Water. WICS is the economic regulator of the water industry, and Sarah Boyack set out why it is important that we have a properly functioning regulator. Over the summer, but also over the past few years, industrial relations have been at an all-time low in Scottish Water. The workforce has lost confidence in the senior management team at Scottish Water, and the regulator does not seem to care.
In the cabinet secretary’s reply over the summer to my letter to the First Minister, I think that there was a recognition that things have to improve at Scottish Water. However, I would like to say to the cabinet secretary today that, if the regulator was not doing its job and we cannot rely on the judgment of that organisation in recent times, we must look again at decisions that have been taken at Scottish Water that affect the current workforce, and consider the very real fear that we are seeing backdoor privatisation. I am looking at the cabinet secretary’s face and I can see that she is disagreeing—I am happy for her to intervene. If we look at some recent reports on this and listen to the workers—I urge the cabinet secretary to do so—we see that they are very unhappy and that they are raising the issue because they believe that it is in the public interest to do so.
We all want world-class water in Scotland. We want safe, high-quality water—the issues about water scarcity were rehearsed at First Minister’s question time—but we need to have confidence in the regulator, Scottish Water and the Government, and confidence that they will not take their eye off the ball again. I would be happy to hear the cabinet secretary’s response to that.
16:26
I, too, thank the committee for its dogged investigation into the matter. Proper spending of public money is of the utmost importance. The principle is not optional or aspirational; it is fundamental to public trust in Government and public bodies. The financial governance that we have seen at WICS was, to be frank, gobsmacking.
The findings laid out in the Public Audit Committee’s report paint a scandalous picture—one of serious failures in financial management, in board oversight and in culture at the very top of a public body. As has already been rehearsed today, all the lavish spendings that we have heard about are not appropriate uses of public funds—they do not reflect public sector values, they fail to deliver value for money and they absolutely erode public confidence.
The failures in governance were just as stark. The report found that the WICS board did not exercise the oversight that was expected of it. Any of us who are or have been members of boards must absolutely understand the responsibility that comes with it when it involves careful management of public resources. Decisions in this case were taken without any due process, without any challenge and without reference to value. The culture that developed within the organisation, which was described by staff as “toxic”, further compounded those governance breakdowns.
My thoughts are with the staff who endured the reported toxic environment, as I know how damaging it can be, especially when there appears to be no clear path to challenge or change it.
Acknowledging those failures is only part of the response. The Scottish Government must expect the highest standards from its public bodies. In the light of the issues raised, action has now been taken. The Government commissioned and published and is now implementing the findings of both internal and independent reviews, which have led to concrete changes in how WICS is governed, in how the Scottish Government exercises its sponsorship responsibilities and in how whistleblowers are supported.
We have seen some progress. WICS has accepted responsibility and has begun the hard work of reform, by tightening financial controls, strengthening internal assurances and refocusing its leadership on transparency and accountability. The Scottish Government, for its part, has taken steps to ensure that its oversight of all public bodies, WICS included, is stronger, clearer and more robust. It is good to hear from the cabinet minister today that reliance on one person’s reporting and sponsorship arrangements will no longer happen.
Public money must always be treated with respect. The reforms are not just about process but about trust—trust that public bodies are acting in the public interest, trust that decisions are taken with integrity, and trust that, where there has been a failure, there is accountability.
Going forward, the focus must now be on embedding a culture of compliance in WICS—one that values scrutiny, upholds standards and earns public confidence.
I echo the calls for a focus on the future of Scottish Water. As it is a beloved institution, we need to make sure that it is fit for purpose. On the operations of other quangos out there, we need certainty that we can have confidence in our public bodies and how they use public funds.
16:29
Let us be clear: this was a major scandal. We have had some robust meetings, but these were some of the most astonishing meetings that I have ever been involved in. It was not just a case of a few minor missteps; it was a catalogue of serious failings—failings in financial control, in oversight, in leadership and in culture. Those failings have cost the public purse and, more important, have cost public trust.
The reports from the Auditor General laid bare the reality. Splashing the cash was rife, and there was no one to turn the taps off. We saw that public money had been spent on overseas training courses, including £77,000 to send a staff member, who has now left the organisation, to Harvard. That was approved without proper scrutiny, competitive tendering or prior Government approval. What was the Scottish Government’s response? Retrospective approval—not because the spending met the standards of the Scottish public finance manual, but because the money had already been spent.
Will the member take an intervention?
If it is brief.
I have a question on that £77,000. Was any of that able to be clawed back from that employee once they had left the company?
The answer is no—the money had been spent. That was not an oversight; it was rubber stamping.
We saw that Christmas gift vouchers had been handed out that were in breach of delegated limits. We saw expense claims without receipts, alcohol spending reimbursed and subsistence levels removed. Those were not isolated incidents. There were lavish dinners, including one dinner for two at the posh Champany Inn in Linlithgow that cost £400 and another at the Road Hole Restaurant in St Andrews that cost £370. We also learned that a London-based KC was on a retainer, at huge cost, for more than a decade.
What of the sponsorship team? Its role is to challenge, scrutinise and uphold standards, but it failed to do so. It failed to escalate concerns. It failed to intervene. It failed to protect the public interests. That is not good enough.
The former chief executive’s departure is another example. A settlement agreement was signed in haste, bypassing proper procedures and removing the possibility of disciplinary action, and more than £105,000 was paid out with no clear justification and no accountability. Incredibly, a public relations agency was appointed, at even more cost to the taxpayer, to advise on how to counter negative headlines about it. You could not make it up.
WICS has now taken steps to improve financial controls. The Scottish Government has committed to strengthening sponsorship arrangements—not before time. We must also look at WICS’s international consultancy work, which has been put on hold for now. It generated income, but it contributed to the drift in culture.
There is also the bigger question, raised already in the debate, of whether we should have the organisation at all. I think that the Government needs to look seriously at that question and consider getting rid of WICS altogether.
Parliament has the job of holding public bodies to account. We have to ensure that they operate with integrity, that oversight of them is robust and that public money is treated with the respect that it deserves. Let the report be a turning point, and let us work together to restore the standards that the people of Scotland expect and deserve.
16:33
I, too, thank the committee for the hard work that was put into the report.
We are here to discuss audits of the Water Industry Commission for Scotland, but it would be remiss of me not to reflect on some other aspects of water in Scotland, given the public coverage that there was over the recess. In case colleagues do not recall it, I remind them that the UK environment secretary, Steve Reed, made some very daft comments—in my opinion—about Scottish water. He claimed wrongly that pollution levels are worse in Scotland than in England. I would expect better from a UK minister than to share such misleading claims, to talk down Scotland and to talk down the value of Scottish Water being in public hands in the process.
I am not going to suggest that everything to do with water in Scotland is perfect. Clearly, we have a report in front of us that recognises what has not gone right—in this case, in the Water Industry Commission for Scotland. However, I want to make clear a few things that are undeniable. In Scotland, we have less pollution in our waterways than England has. A recent report found that 66 per cent—two thirds—of Scotland’s water bodies are of good ecological status, compared with just 16.1 per cent in England and 29.9 per cent in Wales.
Moreover, water bills are lower. Water bills in Scotland average just £490 compared with £603 across England. In addition, Scottish Water being in Scotland’s hands is working because public ownership means not having to pay out millions in dividends. As a result, it costs folk less to have the cleaner water that we have in Scotland.
My final point is that tap water in Scotland is tastier. I have tried tap water in other places and it has not been that great. When we get to a tap in Scotland, especially in the north-east and the Highlands, and pour ourselves a glass of cold, crisp Scottish water, we soon find out that it is delicious.
Having covered that off and said my piece about Scottish Water, I want to go on to the substance of the report. It highlights a number of failures at the Water Industry Commission for Scotland—which I am going to call WICS from now on, as I just stumbled over saying it. There were a number of financial management and governance failures at the commission; there was retrospective authorisation of high-cost training; there were improper staff gifts; there were weak financial controls; there were cultural issues with bullying; and there was a lack of challenge to leadership. All of those things were unacceptable. We expect our public bodies to have the highest standards, and that was not the case here.
I am pleased that the Scottish Government has acted decisively by strengthening the WICS board, resetting the organisation from the top down and appointing interim members to get the organisation on a path to rebuilding public trust. The report is part of that process, too.
Will the member give way?
I am not sure whether I have time.
There is no time in hand.
My apologies.
I thank the Public Audit Committee for taking the time to consider all of this and for asking the difficult questions that need to be asked when public money is not being spent properly. I want Scottish Water, WICS and every aspect of water in Scotland to remain something for us to be proud of—well run, affordable, delicious and publicly owned. I hope that the work that we have seen from the Scottish Government and the committee to help WICS with its reset will ensure that, for years to come, Scotland’s water remains in Scotland’s hands.
Thank you. We now move to closing speeches, and I call Alex Rowley to close on behalf of Scottish Labour.
16:37
I commend the Public Audit Committee for its excellent report and the detail that it has gone into. Richard Leonard has set it all out very well, so I will not simply repeat it.
As others—Mark Ruskell, Sarah Boyack, Graham Simpson and Monica Lennon—have made clear today, the Government needs to look at its role in this. A memory that will always stick with me goes back to when Thatcher was in power and wanted to privatise Scottish Water. The then Labour MEP Alex Falconer hired buses and we all bussed it up to Glendevon reservoir and launched the campaign to stop the privatisation of Scotland’s water. It is important to look not just at what WICS has been doing but at what it has not been doing. The Government needs to take a closer look at that.
This morning, I spoke to my trade union, Unison, which represents workers at the commission, and I want to put on the record what it said to me. It said:
“On decisions affecting the workforce, Scottish Water has taken decisions on whether to deliver operations directly or through procurement without any form of consultation with the staff trade unions or, indeed, acknowledgement that this is necessary. There has also been no consultation with the trade unions on Scottish Water’s plans for ‘transformation’.”
The First Minister
“and cabinet secretary have both endorsed Scottish Water’s publicly owned delivery model, but it is increasingly not a publicly delivered service.
Given the failures revealed at WICS, including the failures in Scottish Govt sponsorship of the regulator, these decisions, which have a direct impact on employed staff, deserve detailed scrutiny. This is especially timely and necessary as planning is in train for the new regulatory planning cycle 2027-2033. Scottish Govt should be asked to investigate the evidence that outsourcing decisions taken by Scottish Water deliver value for money.”
It is certainly clear that WICS has not been doing its job in that regard.
It is time for the Scottish Government to intervene and take the lead by reminding Scottish Water that it is a publicly owned company that the public expect to be properly run. The First Minister and the Cabinet Secretary for Climate Action and Energy continue to express confidence in Scottish Water’s executive leadership team, but they should be reminded that their confidence is not shared by the Scottish Water workforce. In the most recent staff survey, there was a very low level of confidence in the direction that the executive leadership team is taking the company in.
We should be proud of Scottish Water, and I agree with the point that Jackie Dunbar made earlier, as I was appalled when I heard the Labour minister attack Scottish Water. Scottish Water is a public company—we fought for that and stopped its privatisation—and we need the Scottish Government to show leadership, because there are serious concerns about the leadership in Scottish Water at this time. It is a public company, it is under public ownership and, therefore, the Government must take more of a lead.
I agreed with Mark Ruskell when he questioned whether WICS is the right model. That is a serious question that the next Government must look at in the next session of Parliament.
We are proud of Scottish Water and we prevented it from being privatised. Let us ensure that it is not privatised by the back door by management that is, it seems, accountable to nobody.
16:41
My thanks go to the Public Audit Committee and its clerks for the report, which was published in May, and to the Auditor General for his earlier work in looking at the functioning of the commission.
Sadly, we are dealing with a report that, as we have heard, details what the committee has called a “catalogue of failures” in a Scottish Government quango. Where public bodies fall short, we should all have an active interest in putting things right, particularly in cases where public money is misused. This chamber has a responsibility to taxpayers to ensure that their contributions are put to good use.
I welcome the committee’s report and, in particular, its recommendations, which build on and develop the work of Audit Scotland. It is an important step in setting things right after this very public scandal.
We should consider, however, that the issues at WICS happened in plain sight. This was not an organisation gone rogue; it was not some obscure institution hidden away or forgotten about. We heard of regular communication with the Scottish Government at a variety of levels. There was no shortage of red flags. Rather, this seems to be a story of two organisations—the Scottish Government and the commission—operating at cross purposes and of the role of oversight being consistently neglected.
Other members have detailed many of the individual issues with the commission, and I do not intend to rehash them. However, this was more than just bureaucracy being circumvented or a lack of diligence in reporting. Many of those situations are essentially inexplicable.
What should be surprising is the number of opportunities that existed to have the commission change course. We find several examples where proper procedures were not followed, but approval for actions taken by the staff was given retrospectively. Although there are occasions when that sort of retrospective permission will be necessary, I suggest that they should be few and far between. In repeatedly authorising such actions, the Scottish Government effectively opened the gates for the commission to act how it pleased. I am encouraged, at least, that the committee’s report notes that that has been recognised and that a different approach will be taken towards retroactive approvals by the Scottish Government.
Overall, the report recognises significant failings and weaknesses in the Scottish Government’s sponsorship role. It is likely that there are issues that go beyond the commission, given that the report notes the Auditor General’s evidence that there is
“wide variation in the quality of sponsorship of public bodies.”—[Official Report, Public Audit Committee, 8 February 2024; c 18.]
There has been public concern about the use of quangos and whether true accountability is provided by having those organisations at arm’s length from Government. Regardless of what view we take on that debate, where autonomy is needed, it must be accompanied by high standards of governance, communication and conduct—something that has been sorely lacking.
Although progress has been made, it is clear that there are still many issues to address. I will briefly turn to some of my colleagues’ contributions. Douglas Lumsden’s speech focused on the importance of the oversight role and the clear evidence in the report that certain staff were behaving in a way that suggests that they saw few consequences for their actions. He also dealt with the departure of the previous chief executive, which, of course, had a considerable cost, and the positive response from the new chief executive, who will most likely face additional scrutiny as he attempts to turn things around at the commission. All in all, Douglas Lumsden pointed to the situation being a far from isolated example of taxpayers’ money being lost in Scotland’s public sector. In many ways, it seems that the Scottish Government is a little too comfortable with seeing people’s money wasted and siphoned off.
Tim Eagle spoke about the context of the water industry here in Scotland and the importance of proper regulation. The provision of water is, as he highlighted, of fundamental importance in regions like ours in the Highlands and Islands. He also touched on a quango culture in Scotland—that is, the abundance of public bodies of various types operating without the proper care and oversight of Government. Although today’s debate is only one example, members’ concerns—on this side of the chamber, anyway—about the governance of public bodies extend more widely.
I will turn briefly to the convener’s speech. He rightly said that it was a matter of serious concern for the Scottish Parliament and the Scottish Government both that this incident happened and that it should have been allowed to happen. He highlighted the case of a civil servant who said that there was “no material benefit” in retrospectively challenging the £77,000 spend on staff training at Harvard University. I am sure that that will worry members; it would certainly anger many members of the public.
It is notable that the commission is at least partly a regulatory body. It is a problem that business and other organisations are expected to look to the commission for regulation when it has taken such a slapdash approach to its own rules and standards. As the convener rightly highlighted, there will clearly be an on-going issue of trust. That trust will have to be carefully rebuilt not only by the commission but by the Scottish Government.
16:47
I welcome all the contributions from members across the chamber today. They have, of course, been largely to do with WICS and the committee report, but I have been listening very carefully to all that has been put to me. I have heard valid criticism of WICS and the Scottish Government. I have also heard criticism that is not so valid. I asked members who said that there were still gaps in the Scottish Government’s response what they are, and if they are legitimate, I will look into them, but I do not think that they are. We have acted swiftly to address the concerns.
I had great concerns about the sponsorship issue. I wanted to make sure that it was fit for purpose going forward. As a cabinet secretary, I do not ever want to be in the position of finding out the things that I found out about WICS when I took up the post. I was as shocked as anyone else and, to be honest, very angry. I am very angry that public servants—who are no longer working for WICS and are now long gone—allowed that culture to exist. Some have pointed to reasons why that might have happened, but I will be keeping a very close eye on the new leadership. A new chair will be appointed—they are recruiting right now. The various report’s recommendations and actions were taken. I have really tried with my directorate to do all that we can to avoid a repeat of any of the issues at WICS. Again, I thank Ronnie Hinds for taking up the post temporarily to oversee those reforms.
Will the cabinet secretary give way?
No—I have only six minutes.
Now is the time to look forward. I will take the comments of Monica Lennon, Alex Rowley and Mark Ruskell into account as I work with the new team, because legitimate questions have been posed. Alex Rowley asked what the old guard were not doing or perhaps not scrutinising. As we recruit the new chair and I speak with the new chief executive, it is very important that we ask those very pointed questions.
I also want to say how refreshing it is to hear a Labour member, Alex Rowley, call out the misinformation that Steve Reed has put out about Scottish Water. The nationalisation of Scottish Water should be a source of pride for all of us. We rightly have to scrutinise how that is done, but our water is of a very high quality. It is unfortunate that even today, in environment, food and rural affairs questions, Steve Reed repeated the same misinformation.
As a Government, we have learned lessons about sponsorship, which I want to talk about. Our approach is now robust and systematic, with appropriate senior scrutiny that is supported by a team that is properly resourced and trained. The team will continue to monitor progress and ensure that long-term change is embedded. The reset of WICS continues with three new board members formally appointed last month, which takes the board to a full complement.
Graham Simpson pointed out that its global consultancy work has been paused, and asked whether that was a driver of the culture, which is a legitimate question. I would have to be convinced that the activity has a positive effect on the performance of the regulator and WICS as a whole before it were to restart that work. Good governance will enable WICS to focus on its core functions, which is what I want it to do. I want the new board and management team to prove to me that it is an informed organisation. WICS has been a highly respected regulator—it had the global consultancy work because it was asked for its opinion throughout the world. Its work has informed some of the conclusions in the Independent Water Commission’s recent review of the sector in England and Wales. I want to see it being a respected organisation again.
A comment was made about whether it was not just small mistakes that were made. Buying expensive meals and allowing ridiculous expenses were not mistakes: that was part of a culture that had to change. Those were not errors; wilful decisions were taken.
The cabinet secretary may be coming to it, but several members have raised the question of whether we need a water industry commission, at least in its current form. Does she agree that that is a valid question to address?
I can understand why that question has been asked, given what has happened. For want of a few individuals at the top who have perpetrated a culture that is unacceptable in a public body, I think that we need to give WICS a chance to re-establish itself, and I want to give it that chance, because the core role that it performs is widely respected. Obviously, I will listen to what members have said in the debate.
Will the cabinet secretary take an intervention?
I am afraid that I do not have time; I have 20 seconds left, so I will close.
I hope that the debate and the committee’s report will draw a line under the historical issues that have been raised and that members will join me in looking forward with enhanced scrutiny of WICS. The task that I put to WICS now is to rebuild public trust by governing itself appropriately, while delivering effective regulation for the people of Scotland. I will personally take a direct interest in ensuring that that happens.
I call Jamie Greene to wind up on behalf of the Public Audit Committee.
16:53
I thank all members for their contributions. I quote three words from the debate for those who are just joining us: “gobsmacking”, “scandalous” and “egregious”. Those are some of the comments that have been made about the outcomes of our committee’s report.
I thank Audit Scotland for its detailed and forensic analysis of this public body. Had it not sanctioned a section 22 report, perhaps none of this would have come to light. Let me be clear: the Parliament’s Public Audit Committee was united across political party lines in its criticisms of what occurred at the Water Industry Commission for Scotland. We were united in calling out the failures of the Government, both by the regulator, its board and its leadership and management teams, and by the Scottish Government’s sponsorship team which, I may add, reports directly to ministers. Our committee was united on the numerous examples of careless financial controls, none of which presented value for public money or the sort of fiscal prudence that we have come to expect from well-paid executives who are in positions of trust.
Much of our deliberation focused on the arrangements concerning the departure of the former chief executive. We have heard some of that today. Here is what happened: the day before the Auditor General for Scotland published his first report on WICS, the former chief executive took the decision to resign. The board fast-tracked that resignation in a matter of days. He was then paid for his six-month notice period.
There are so many unanswered questions about that entire process. The chief executive’s exit hampered our ability to scrutinise and to hear a full report of what happened—not only about his departure but about the events that led to his departure. That is really what mattered. What was the cause of his departure? What happened in that body that led to the section 22 report?
I was extremely concerned, as was the committee, to learn that the chief executive was potentially advised to resign ahead of the Public Audit Committee inquiry. In fact, he said—it is in our report—that the deputy director of water policy at the Scottish Government
“reiterated the likelihood of PAC inquiry and that I should perhaps negotiate an earlier exit.”
What on earth happened in that conversation? Which senior civil servant should ever offer advice like that to a chief executive of a public board?
Will the member take an intervention?
I have not got time. I am sorry.
Let me be clear: the PAC expects accountable officers in such organisations to remain in post, in so far as is possible, to be accountable for their actions and the actions of the body that they oversee. This whole ordeal speaks to a wider issue, which is the relationship between senior civil servants and the chief executives and board chairs of public organisations. Our committee report makes that clear, and I am pleased that the cabinet secretary acknowledged that, both in the report and in the response to it, saying:
“We recognise there were shortcomings in the way the Scottish Government carried out its sponsorship role”.
That is a welcome admission.
However, it goes further than that. In our evidence sessions, we witnessed direct contradictions in evidence from witnesses. During one evidence session, in September last year, the former chair of WICS was asked whether the board followed due process. He said that it did. A senior civil servant from the Scottish Government, sitting two feet away from him, said that it did not. So the back and forth went during the committee session—he said, she said. That does not strike me, nor did it strike the committee, as an effective, productive or even healthy relationship between a public body and the Scottish Government.
Not only did the Auditor General find that the culture at WICS did not focus on best value for public money; he highlighted issues with behaviour and culture. That should also be of concern to us all. It says in the Government’s own review that senior officials
“were aware of issues relating to behaviour and culture ... there was a lack of evidence to demonstrate action taken as a result.”
I hope that something has been learned from that process. Whistleblowers cannot be dealt with in the manner that they were in this case. Evidence was sent to us by former members of staff of WICS, who talked about a “toxic” culture in the organisation.
The other issue that has arisen today looks forward at what happens next. That is the inherent conflict of interests that arose at WICS. WICS was acting as an industry regulator—an economic regulator, not an environmental one, I should add—a task which, no doubt, has some merit and is necessary. It was also operating as a quasi-commercial organisation, which directly arose off the back of the Scottish Government’s hydro nation strategy. Indeed, the very role of WICS moving forward is a live debate, and one that we should have before the election.
The chair of the board of WICS himself said:
“It is not unreasonable to ask questions about whether an organisation such as WICS is needed”.—[Official Report, Public Audit Committee, 19 February 2025; c 69.]
Does Scotland need an organisation to regulate the water industry when Scotland has no commercially competitive residential water industry? That is a valid question.
WICS’s own website—if members look at it right now—focuses entirely on its international consultancy remit, and less on the regulatory role that we expect it to play. The website says,
“we really enjoy meeting others who work in the field of regulation!”,
as some sort of rationale for how Scottish customers benefit from its international commercial activity. That will come as no comfort to those who are seeing their water bills rise or their rivers polluted.
Public bodies that behave like private companies—in terms of their remuneration packages, perks, expenses, culture and management style—will inherently and undoubtedly result in the very failures that we have heard about today, and which our report highlights. I welcome the fact that that activity has been put on pause, but we recommend that a full business case be put together before any decision is taken about whether it should resume.
The committee’s report is one of the most damning that I have had the pleasure of drafting in my nine years in the Parliament. Our forensic work and that of Audit Scotland shone a light on practice that had hitherto gone unnoticed. It should not have taken a section 22 report to unearth such fiscal mismanagement in a public body.
The report does two things. As well as highlighting the importance of good audit, it highlights the importance of the Parliament’s Public Audit Committee. I am proud and pleased to be the committee’s deputy convener, because we take a convivial and constructive attitude to the scrutiny that we do. We park our politics at the door, we roll up our sleeves and we get on with it. The 48-page report before Parliament today is testament to that. My only hope is that the Government, WICS and all other public bodies take heed of today’s debate. We say to them: we are watching you. We want our findings and our criticisms to result in tangible and concrete action and change to ensure that such errors never happen again.
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