Official Report 586KB pdf
Public Services Reform (Scottish Water) Order 2026 [Draft]
08:40
Our second item of business is consideration of a draft statutory instrument. The purpose of the order is to amend the Water Industry (Scotland) Act 2002, which sets out statutory requirements for the composition of the board of Scottish Water. The Delegated Powers and Law Reform Committee has made no comment on the instrument.
I welcome to the meeting Gillian Martin, the Cabinet Secretary for Climate Action and Energy, and her supporting officials: James Simpson, the unit head for the water industry division; and Lucy Drummie, a lawyer for the Scottish Government.
The instrument has been laid under the affirmative procedure, which means that it cannot come into force unless the Parliament approves it. Following the evidence session, the committee will be invited to consider a motion recommending that the instrument be approved.
I remind everyone that the Scottish Government officials can speak in the evidence session but not in the debate that follows.
I invite the cabinet secretary to make a short opening statement.
I will take the committee through the instrument. Under the Water Industry (Scotland) Act 2002, Scottish Water must have a minimum of three executive members on its board. That statutory requirement is currently fulfilled by the appointments of the chief executive officer, the chief financial officer and the chief operating officer as executive members.
The simple purpose of the order is to reduce that requirement to a minimum of two executive members. It will support governance arrangements regarding executive representation that Scottish Water intends to implement upon the retirement later this year of the chief operating officer, whose role is not being backfilled. The CEO and CFO will remain executive members. The order will therefore help to ensure the effective administration and governance of the Scottish Water board and reflect changes to the senior management structure.
In line with the Public Services Reform (Scotland) Act 2010, I consider that the order will improve the exercise of Scottish Water’s public functions, particularly with regard to its economy, efficiency and effectiveness. The order will avoid a scenario in which Scottish Water is required to designate a new executive member with the associated remuneration when the board does not believe that to be the best course of action.
Effective oversight of Scottish Water’s executive will continue through the non-executive directors, whose composition and responsibilities will remain unchanged.
The Scottish Government consulted key stakeholders on the proposal, none of whom raised any substantive concerns. I will be happy to answer any questions that the committee may have.
Thank you. The order will reduce the number of executive members on the board from three to two, and the requirement in the legislation is that non-executive members must outnumber executive board members by at least two. Do you propose, in due course, to reduce the number of non-exec directors in Scottish Water?
:No, the number of non-executive directors will remain at the same level as it is now.
I know that it will under this order, but my question is, now that you are reducing the size of the executive board by one member, is it your vision that the number of non-executive directors could, in the future, be reduced as well?
:There are no plans to do so.
There are no plans to do so—okay.
It was good to get clarification that there will not be a reduction in the number of other board members. However, as part of the evidence that we have taken, trade unions got in touch to say that this is a good opportunity to have trade union representatives on the board of Scottish Water. Is that part of your consideration at the moment?
There are three trade unions that represent workers in Scottish Water and, as in many other cases, they have shared concerns. They think that, in line with the Scottish Government’s fair work and fair work first principles, having a worker’s voice involved in the forum that has oversight of Scottish Water would be a big step forward. They give the example of the recent industrial disputes that seem to have gone on forever without resolution and say that having union people on the board would lead to a more constructive and accountable framework. In recent days, they have expressed concerns about Scottish Water being privatised by stealth and the fact that it is now almost indistinguishable from the private sector companies down south.
There is therefore quite a lot of concern and, if we agreed to the approach today, there would be a real opportunity for Unite the Union, Unison Scotland and GMB to get properly involved in the oversight, and it would bring many benefits. What is your thinking on that? The unions are looking for three representatives but another option is to have at least a trade union representative on the board to deliver more accountability and constructive working relationships.
08:45
:I am aware of the unions’ calls for that but there are no plans to do it. In 2002, when the Water Industry (Scotland) Bill was being considered, we considered how best to represent staff interests at the board level. At that point, the ability to have union representation on the board was rejected. Indeed, there is no worker representation on the board of any other public body. As per the Water Industry (Scotland) Act 2002, Scottish Water appointed a non-executive member who has specialist knowledge of employee interests. That person was reappointed in May 2025. Following the period of industrial action and strained industrial relations that Sarah Boyack mentioned, we sought greater clarity from Scottish Water’s director of people and director of governance that they are clear about their responsibilities to manage any potential conflicts.
To come to the other point that the unions made, I reject the assertion that Scottish Water is being privatised by stealth, if that is the phrase. I am proud to say—we should all be proud—that Scottish Water is a publicly-owned resource. We just have to look at the other parts of the United Kingdom where water is privatised. Last week, there were documentaries on television showing some of the disgraceful actions of private water companies. Every penny of Scottish Water profit is put back into improving the operations of water in Scotland.
We remain committed to a publicly-owned Scottish Water where all profits go into improving the service. Scottish Water is performing well as a publicly-owned corporation. If it contracts private companies, it is largely to do with capital expenditure programmes for improving infrastructure. Scottish Water has a large programme of work to improve its infrastructure throughout the country.
I therefore reject the characterisation that Scottish Water is being privatised. It is not privatised. It is in public hands and not a penny of profit goes to shareholders, which could not be said of other water companies in the UK.
Before we leave the subject, I read the letter from the unions and each union seems to be asking for a representative on the board, so that would be three on a board of between five and eight non-executives, which would be quite a heavy balance, to my mind. Cabinet secretary, could you remind me who the person on the board is who has specialist knowledge of employment so that we know if we are asked?
:Do you want their name?
Yes.
:It is Steve Dickson.
What is his experience?
:My officials might have his title to hand.
The 2002 act requires the appointment of a non-executive member with employee interests. Steve Dickson is considered to have the relevant experience for that role.
Remind me of what that is, if you do not mind.
I do not have Mr Dickson’s CV to hand but we can certainly provide the committee with that information.
It would be useful to know that, so we can be sure that the committee has considered the issue fully. Do you want to come back in, Sarah?
:In previous evidence, we heard that the issue is not just about new capital investment; there are concerns among Scottish Water workers that there are fewer workers because contracts are being outsourced. To what extent can a longer-term approach be taken? The cabinet secretary is absolutely right—there will be a lot more investment in our water infrastructure to make it resilient, modern and up to date. Would that not be an opportunity to expand staffing, so that the staff get decent terms and conditions and everything is not outsourced to private companies?
Cabinet secretary, I will let you answer some of that, but I ask Sarah Boyack to bear in mind that, although it was a nice push, we are considering a specific statutory instrument.
You may answer briefly if you wish, cabinet secretary.
:That is an operational matter for Scottish Water as the employer. It currently employs nearly 5,000 staff. If it expands its operations, expanding the number of its employees is up to Scottish Water. All 5,000 staff continue to benefit from being part of the public sector pay policy. It is not right to say that the work, pay and conditions are not fair.
That took us a bit far from the statutory instrument.
It is disappointing that there is no automatic seat on the board for worker representation. ScotRail’s board has a representative who has come from a senior position at the Scottish Trades Union Congress. That is the kind of representation that we look for on a public utility.
I come back to the balance of non-executive and executive members. You said that Steve Dickson represents the interests of employees and employee rights, but we do not know what his background is. We will get his CV—maybe we can google it.
I also note that the reduction in executive board directors involves the removal of the role of chief operating officer, who would normally be responsible for all elements that relate to staffing, recruitment and terms and conditions. I am a bit concerned—and I think that the Water Industry Commission for Scotland has also raised this concern—that, with the COO no longer in existence and part of the board, there is a danger that some of the staffing issues, which have been in the public eye through the concerns of unions, could somehow slip off the agenda a little bit more. Who from the executive board team will be primarily responsible for those issues, which are of concern and importance?
:The chief executive officer will be responsible for those issues.
I am a little confused. No concerns on that decision were raised with me by WICS. In fact, it is quite unusual for public bodies to have three separate executive roles. Scottish Water is being brought more into line with other public bodies.
I also want to reflect on having a member to specifically represent employee interests. The STUC was directly consulted on the appointment of that person. It commented on the scope of the role in 2020, before that was last advertised. The member was reappointed in 2025. Committee members want to know more about the credentials of that member. I am happy to liaise with Scottish Water and get it to give the committee that information. That seems to be the substantive ask of committee members—that you should know a little more about the credentials of the member with responsibility for employee interests.
:Your expectation is that the CEO will take over the role of the COO on the board in relation to staffing. However, the evidence that we have had—which we can forward to your team—is that WICS believes that there is a need for oversight at board level when it comes to previous COO responsibilities, particularly in relation to staffing. That is why I am asking the question. I have had the evidence from WICS.
:I will bring in James Simpson, because WICS has not raised anything—
:I am asking the question based on evidence that has been given to the committee. I am relaying that.
The COO’s responsibilities, in the round, will be split across the senior management team. That is a decision for the CEO as accountable officer. When it comes to staffing responsibilities and oversight, there is a director of people in the senior management team, and that role will remain. Any people matters—including health, safety and wellbeing—would be brought by the appropriate person to the board, as is already the case. When it comes to the regularity of the board’s receiving that information, the CEO already holds that accountability.
To help you, cabinet secretary, WICS responded to the committee on 27 November 2025, and a copy of that letter was sent to you, in which it expressed its concerns and asked you how the cost savings would be implemented and shown. I am sure that you have looked at that letter and will respond to let WICS know the answers.
Given that there are no further questions, we move to the next item—a debate on motion S6M-20592, which calls on the committee to recommend approval of the Public Services Reform (Scottish Water) Order 2026. Cabinet secretary, I ask you to speak to and move the motion, or just to move the motion—whichever you see fit.
Motion moved,
That the Net Zero, Energy and Transport Committee recommends that the Public Services Reform (Scottish Water) Order 2026 [draft] be approved.—[Gillian Martin]
There are no contributions from members. Cabinet secretary, you get the chance to sum up but, as no one has said anything, I am not sure that you will want to. Do you want to sum up?
:No, thank you.
Motion agreed to,
That the Net Zero, Energy and Transport Committee recommends that the Public Services Reform (Scottish Water) Order 2026 [draft] be approved.
I ask the committee to delegate authority to me as convener to approve a draft of the report for publication. Are members happy for me to do that?
Members indicated agreement.
I thank the cabinet secretary and officials. I now briefly suspend the meeting, to allow for a change of witnesses.
08:56
Meeting suspended.
09:00
On resuming—
Renewables Obligation (Scotland) Amendment Order 2026 [Draft]
Welcome back. Item 4 is consideration of a further draft statutory instrument. The order changes the index that is used to make inflationary adjustments to the renewables obligation buyout price from the retail prices index to the consumer prices index from 1 April 2026. The Delegated Powers and Law Reform Committee has made no comment on the instrument.
I welcome back Gillian Martin, the Cabinet Secretary for Climate Action and Energy, and her supporting officials from the Scottish Government: Madeleine Plater, unit head for energy markets and strategy, and Matthew Lourie, policy manager for energy markets and strategy.
The instrument was laid under the affirmative procedure, which means that it cannot come into force unless the Parliament approves it. Following this evidence session, the committee will be invited to consider a motion to recommend that the order be approved. I am sure that I do not need to remind everyone that Scottish Government officials can speak in this item, but not in the debate that follows, should there be one. I invite the cabinet secretary to make a short opening statement.
:I will take the committee through the amendment order. It makes one technical but important change to the renewables obligation Scotland scheme. Currently, certain elements of the scheme known as the buyout price and the mutualisation cap rise each year in line with the retail prices index. From April this year, subject to parliamentary approval, those values will be updated using the consumer prices index, which will lead to savings in the energy system.
The renewables obligation Scotland scheme has supported renewable electricity generation in Scotland since 2002 by issuing certificates to generators that can then be sold to suppliers. Those electricity suppliers can use the certificates to meet their obligations under the scheme, or they can make a payment that is known as the buyout price. The amendment order will ensure consistency across the UK, which is essential for market stability, and it will ensure a level playing field for suppliers and generators that operate across borders.
The consumer prices index is recognised as a more accurate and reliable measure of inflation, whereas the retail prices index tends to produce higher inflation figures, which could lead to the buyout price rising faster than is justified. That would add unnecessary and avoidable costs on electricity suppliers, which are ultimately passed on to households and businesses. Switching to the consumer prices index will ensure fairness for consumers, while maintaining strong investor confidence in our renewables sector.
The change does not alter how the overall scheme works; it is a simple technical change to the annual indexation mechanism only. With the UK Government and the Northern Ireland Assembly, we jointly consulted to seek views on two options, which were an immediate switch to the consumer prices index or gradual realignment. Following careful consideration of the responses, all three Governments agreed to proceed with an immediate switch to the consumer prices index. We recognise that many industry stakeholders were initially concerned about the potential for change to undermine investor confidence and increase the cost of capital, but we consider that that approach strikes the appropriate balance between reducing costs for consumers and supporting continued investment in the renewables industry.
The change has no expected financial impact on the Scottish Government. We will continue to engage with industry stakeholders and monitor the operation of the scheme. It is a necessary and proportionate amendment to keep the scheme fair, efficient and aligned across the UK.
If you would not mind, cabinet secretary, can you tell me where the UK Government and the Northern Ireland Executive are in relation to their legislation on this?
:I will go to my officials for that.
This order is the first piece of legislation to make the change. All three Governments are looking at amending their respective legislation on the renewables obligation—that includes the schemes in Northern Ireland and in England and Wales—but this is the first committee evidence session on such legislation, so we are the first to consider it.
When will the other pieces of legislation go through?
I do not have the dates in front of me, but it will be in the next few weeks.
That would be April.
Yes.
That is why I was trying to find out where we were.
The legislation needs to come into force before 1 April so that all the arrangements on the operation of the scheme can be made.
If the Northern Ireland Assembly did not agree to such legislation, where would that leave us?
:I think that it will, because that is the recommendation that has been made by the Government, and no substantive concerns were raised in the consultation.
The Government does not always get its way—I am sure that you would agree, cabinet secretary.
Do members have any other questions?
Cabinet secretary, you mentioned that this will not affect people’s bills at all—is that correct?
:There will be cost savings across the energy system, but the Department for Energy Security and Net Zero and the Treasury will look at the impact on energy bills. There will be cost savings across the system and, if there are cost savings for the generators, I would expect them to be passed on to bill payers. However, that is not for the Scottish Government to decide—it is for the UK Government.
:Of course. Am I right in thinking that these are the obligations that have been removed from people’s bills and moved into general taxation?
:Yes.
:Thank you.
We will move on to the next agenda item and the debate on motion S6M-20600, which calls on the committee to recommend that the draft Renewables Obligation (Scotland) Amendment Order 2026 be approved.
Motion moved,
That the Net Zero, Energy and Transport Committee recommends that the Renewables Obligation (Scotland) Amendment Order 2026 [draft] be approved.—[Gillian Martin]
It seems that no members want to make a contribution. Cabinet secretary, I assume that you do not want to sum up, but you can do so if you want to.
:No—I am fine, thank you.
The question is, that motion S6M-20600 be agreed to.
Motion agreed to,
That the Net Zero, Energy and Transport Committee recommends that the Renewables Obligation (Scotland) Amendment Order 2026 [draft] be approved.
I invite the committee to delegate authority to me as convener to approve the draft of the report for publication. Are members happy with that?
Members indicated agreement.
I thank the cabinet secretary and her officials for attending, and I suspend the meeting briefly to allow for a changeover of witnesses.
09:07
Meeting suspended.
09:12
On resuming—
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