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156 MARKET LIBERALISATION & REGULATION IN SCOTTISH WATER SERVICES – HENDRY 16[2006/2007]4 ULR ARTICLE

authority, prices would rise by just 8.4 per cent. A unitary Even in England and Wales, where the private water market
authority was also strongly recommended by the wide-ranging was so much further advanced, water was removed from the
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parliamentary inquiry. The arguments were irresistible and the scope of the then Utilities Bill, and common carriage was
Executive proceeded to bring forward proposals for the not introduced until the Water Act 2003. Secondly, there was
50
creation of Scottish Water under the WISA. The Bill was passed the threat of political resistance; the Strathclyde referendum
in February 2002 and SW began operating on 1 April of the had shown that water was an emotive political issue and this
same year. was unlikely to have changed. Indeed, the political problem
remains and was encapsulated during the debate on WISA
History of the Competition Proposals where one prominent Labour MSP stated his intention to
oppose competition ‘with every breath in his body’. Such
51
The first water enactment of the new parliament amalgamated political opposition has also meant continued resistance to any
the regional authorities to establish SW as a public corporation, suggestion of metering of domestic customers. Although
52
but that had not been the Executive’s initial policy intention. metering is the only real incentive to customers to use less
In June 2000, not long after the first Q&S process, they had water, in a country with an abundant resource the advantages
instead consulted on opening up the existing water sector in may be outweighed by the cost and inconvenience. The position
Scotland to competition. The view was taken that, following at present is that a few domestic customers have meters by
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44
the Competition Act 1998, it was no longer possible to choice. The remainder pay water and sewerage charges in
maintain monopoly provision in Scottish water services, and banded rates related to the council tax and collected with that
the suggestion was that the market should be fully liberalised, tax by local authorities. The current Scottish Government is
enabling competitors to be licensed to provide both water and considering moving to a system of local income tax, and at
53
sewerage services, including treatment and distribution and that time the collection of water charges will also be reviewed;
retail services, for household and commercial customers. The but for these same political reasons it seems most unlikely that
networks would remain in the public sector, and charges for compulsory metering will be introduced in the near future.
network access, as well as the new licensing regime, would be A second consultation by the Executive in 2001 had
the responsibility of the Commissioner. There would be a new maintained the scope of the original competition proposals,
independent regulator for drinking water quality, similar to but also suggested a single amalgamated authority; by the
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54
the Drinking Water Inspectorate in England and Wales, whilst end of the parliamentary inquiry, the agenda had shifted. A
the Scottish Environmental Protection Agency (‘SEPA’) would single service provider, with efficiencies of scale and a clear
continue to issue discharge consents for waste water. 46 programme of investment to meet European quality standards,
The liberalisation proposal was far-reaching and very would be the first step in a staged programme of reform;
ambitious. At that point, common carriage was not yet subsequent to that, competition could be introduced. The
developed in England and Wales, but the private sector Executive acted on that basis and rapidly introduced WISA,
operators were well established. Part of the rationale for the suggesting that a Bill the following year, on the water
move in Scotland was that some commercial users were going environment, could be a vehicle for introducing competition.
off-network and establishing a private supply, in the absence In the event, the Water Environment and Water Services
of any comprehensive controls on abstraction and an ill-defined (Scotland) Act concentrated on water resource management,
55
common law framework. However, those responding to the and that was a prudent move. As noted, it introduced an entirely
Executive consultation and the later parliamentary inquiry 47 new structure for river basin planning, to implement the Water
identified a potentially much more serious problem, which was Framework Directive, and also enabled secondary legislation
that the inefficient industry in Scotland would be an easy target
for the much more commercially-oriented English plcs.
There were other lines of criticism. Firstly, and related to
the worries over relative efficiency, were concerns about 49 Now the Utilities Act 2000 c.27.
capacity. Philip Hunter, writing in the Journal of Water Law, took 50 Water Act 2003 c.38, section 56 and schedule 4, inserting new sections
the view that the industry was not ready for competition, given 17A to 17R and sections 66A to 66L into the water Industry Act 1991
the pressing need to meet service and environmental c.56.
obligations, and suggested that the Executive could wait until 51 John McAllion MSP, during the stage 3 debate on the Water Industry
(Scotland), Bill Official Report of the Scottish Parliament 14 February
the conclusion of the next investment programme in 2006. 48 2002, available at http://www.scottish.parliament.uk/business/
officialReports/meetingsParliament/or-02/sor0214-01.htm last accessed
10 June 2008, at Col. 6538. Mr McAllion has now left both the Parliament
and the Labour Party, but undoubtedly was reflecting widely-held and
strongly-felt views.
43 Scottish Executive 2000 Managing Change in the Water Industry A 52 In the first consultation on competition, the Executive suggested
Consultation http://www.scotland.gov.uk/consultations/industry/mcwi- that there might be wider metering of domestic customers by new
00.asp last accessed 15 May 2008. entrants, but that if so, the same protections against disconnection as
44 Competition Act 1998 c.41. exist in England under the Water Industry Act 1999 would be introduced
45 The Drinking Water Quality Regulator was duly established under in Scotland. By the time that WISA went through the Parliament, there
WISA part 2 sections 7 to 19; for annual reports and other activities of was an unequivocal commitment that domestic metering would not be
this office see http://www.dwqr.org.uk/ last accessed 19 May 2008. introduced; see Allan Wilson, then Deputy Minister for the Environment,
46 Then under the Control of Pollution Act 1974, Note 24 above, and during the stage 3 debate, Note 49 above, at Col.6601.
now under the Controlled Activities Regulations 2005, Note 26 above. 53 Scottish Government 2008 A Fairer Local Tax for Scotland available at
47 For the evidence to the Parliamentary inquiry, as well as the final http://www.scotland.gov.uk/Publications/2008/03/11131725/0 last
report, and also the consultation and the stage 1 report on the WISA, accessed 10 June 2008. Water charges will be only one of the many
see http://www.scottish.parliament.uk/business/committees/historic/ difficulties with such a significant change.
x-transport/2001.htm last accessed 15 May 2008. 54 Scottish Executive 2001 The Water Services Bill the Executive’s Proposals,
48 P Hunter, ‘Opening the Floodgates - the Water Services Bill’, Water Note 39 above.
Law 12[2001] at 184. 55 Note 25 above.

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