S3M-1386 Scottish Water [Opening Speech]

Scottish Parliament

Thursday 21 February 2008

[THE PRESIDING OFFICER opened the meeting at 09:15]

Scottish Water

The Presiding Officer (Alex Fergusson): Good morning. The first item of business is a debate on motion S3M-1386, in the name of Derek Brownlee, on the future of Scottish Water. I invite members who wish to speak to press their request-to-speak buttons now. The debate is a little undersubscribed, so anybody who would like to speak would be welcome.

Mr Brownlee has seven minutes in theory, but we are a little relaxed about the time.

09:15
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09:36

The Minister for Transport, Infrastructure and Climate Change (Stewart Stevenson): In considering today's motion and amendments, we need to keep in mind the unique water industry model that we have in Scotland. The Tory press release of yesterday stated:

"If the Scottish Government is confident that a state-owned Scottish Water is the best option, then it has nothing to fear from a review."

We are confident and we do not fear a review. Indeed, to use a phrase that I have used before, such a review by a new Government would be normal, natural and necessary. We have, of course, examined the status of Scottish Water, and we are happy to examine it further if the motion or amendments are agreed to at decision time.

Derek Brownlee: On 24 May, John Swinney said:

"We will not take forward the recommendation"

of the Howat report

"to turn Scottish Water into a mutual company ... Scottish Water will retain its current status. That is our clear policy position."—[Official Report, 24 May 2007; c 134.]

Jim Mather then said that Scottish Water would not move towards mutualisation under an SNP Government. Is there a U-turn?

Stewart Stevenson: The member should listen to what I said, which was:

"If the Scottish Government is confident that a state-owned Scottish Water is the best option, then it has nothing to fear from a review."

I repeat: we are confident and we do not fear a review.

We have a system that combines the best parts of the privatised industry in England and Wales with, of course, the strengths and ethos of a public sector organisation. The result is a publicly owned water business that is subject to tough independent economic and quality regulation. The system ensures that ministers, not special interest groups, set the strategic direction for the industry on behalf of all the people of Scotland.

David Stewart (Highlands and Islands) (Lab): On regulation, is the minister happy with Scottish Water's current leakage rate? It failed to meet its target by 44 million litres a day, which is the equivalent of 17 Olympic swimming pools.

Stewart Stevenson: The leakage programme started a couple of years ago. The first target was missed by some 4 per cent, which was disappointing. However, Scottish Water has made substantial progress. Indeed, it is doing substantially better on leakage than many of the privately owned companies south of the border. I agree that leakage is an area for improvement, and improvement will be achieved. The public ownership of Scottish Water is a way of ensuring that the Government can act in the customer interest on leaks, as in many other areas.

Patrick Harvie (Glasgow) (Green): I am struggling to understand the purpose of the review, given that the Government is committed to public ownership. Is not mutual ownership incompatible with public ownership? If so, what is the point of the review?

Stewart Stevenson: I am happy to review the status of Scottish Water because I am confident that the review will tell us that we are heading in the right direction. [Interruption.]

The Presiding Officer: Mr Johnstone.

Stewart Stevenson: I am not afraid of a review and I know that others in the Parliament are not afraid of a review. I do not intend that we head towards mutualisation.

I turn to highlight a number of areas. First, average household water charges in Scotland are lower than the average in England and Wales. Furthermore, in Scotland, charges will rise by less than inflation, whereas in England and Wales they will rise by more than inflation. Secondly, in Scotland, we have a company that is delivering for its customers—Scottish Water is outperforming its regulatory settlement and rapidly improving its customer service performance. It is therefore of little surprise that, last year, Scottish Water was judged to be one of the top utilities in the UK by its peers. That is a superb achievement on which I congratulate it. We need only compare that with the situation in England and Wales, where several companies have been fined for lying about their treatment of their customers. The water industry commissioner said that "Scottish Water's achievement" in reducing its operating costs

"is unprecedented in the UK water industry."

The Government does not believe in the current model as a matter of dogma; we believe in it because it works. It is not hard to think of one or two private sector businesses that are not well run, but in Scottish Water we have a high-quality board with experience from the public and private sectors that has the right skills to take forward the organisation.

It is important that we do not take steps to undermine the progress that has been made in recent years. Scottish Water is six years old, which makes it quite a young organisation. In that time, it has made huge improvements, and it wants to make many more.

Liam McArthur: Will the minister give way?

Stewart Stevenson: I think that I am out of time.

The Presiding Officer: Time allows it.

Liam McArthur: The minister referred to the quality of Scottish Water management and the progress that the company has made, which the Liberal Democrats do not dispute. However, in terms of attracting high-quality personnel and management going forward, does he agree that the current model constrains Scottish Water while mutualisation would set it free?

Stewart Stevenson: If I may, I will make a side comment. Standard Life—of which I was a huge defender—provides an interesting example of the mutual model. Ultimately, we found that the company had to go for a stock market listing because of the mutual model constraints. I accept that there is a variety of mutual models. Nonetheless, anyone who suggests that mutualisation is a panacea should examine matters more carefully, particularly when we have a successful model that is delivering for the people of Scotland.

We have tough targets for the future and we need to give Scottish Water space to rise to the challenge. We should, of course, keep an open mind and continue to review the options, but the clear consensus is that Scottish Water is doing well. The suggestion that we should change the model is not particularly robust. I am happy to support the Labour amendment, which strikes the right balance.

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09:42