1. Portfolio/Number/Name:O/C2 - Scottish Water savings |
2. Programme/Activity: Please
include a short description The savings will come from a
combination of a continued reduction in
operational costs and in capital
procurement costs. |
3. Planned Savings | | 2005-06 | 2006-07 | 2007-08 |
Cash (m) | 75 | 85 | 95 |
Time Releasing (m) | 0 | 0 | 0 |
4. Accountable Officer for
delivery | Richard Wakeford |
5. Project Manager | Rosemary Greenhill |
6. EGDG account manager | Iain Dewar |
7. Quality Impact | Describe any impact on the quality
of service delivery. Be specific and
explain if the expectation is positive,
negative or neutral. The quality of service to be delivered
by Scottish Water from 2006-07 onwards was
set out in the Ministerial statement of
water industry objectives in February 2005.
The subsequent Strategic Review of Charges
process will identify the lowest reasonable
cost at which these can be achieved and so
the overall effect on service delivery
should be neutral. |
8. Dependencies | Explain if your savings are
dependant on legislation or other
structural changes. The savings cannot be confirmed until
the Strategic Review of Charges for
2006-2010 has been completed in November
2005. The savings included here are based
on the latest delivery plan for 2005-06
from Scottish Water, and the first draft
business plan produced by Scottish Water
for 2006-2010. A further draft business
plan will be produced in April, followed by
a draft determination of water charges by
the Water Industry Commissioner in June,
followed by a final business plan and final
determination of charges to be completed by
November. This will finalise the efficiency
savings that can be expected over the three
years. |
9. Description of efficiency and
actions to be taken | 9.1 How will the saving be made? Be
specific about number/size of contracts,
staff, posts dates etc. There are two main types of
efficiencies. Operational efficiencies. It is too
early to finalise the baseline for
operating costs for 2004-05, but nominal
operating costs are reported as 300.6m for
2003-04 in Scottish Water's annual report.
It is anticipated that this will reduce by
a further 45m over the next three years on
a like for like basis (i.e. after taking
into account new operating costs associated
with additional assets, inflation and
legislative requirements). This will be
achieved by continuing to make operating
cost efficiencies across most areas of the
business, through a major business
transformation programme. This includes
providing an improved service with less
people (achieved through a voluntary
redundancy programme), rolling out Promise
to Resolution (P2R), an innovative system
for delivering customer service, and
reaping the benefits of merged systems such
as for billing. Capital efficiencies. Scottish Water is
using an innovative partnership - Scottish
Water Solutions - to deliver the agreed 1.8
billion capital investment programme. By
using best practices from throughout the
water industry, Scottish Water's
procurement will be brought closer to the
efficiency levels found in England. It is
anticipated that these will deliver a
recurring saving of around 50m each
year. |
9.2 What action is critically
needed to secure delivery of this saving?
Be specific, and name the key action
managers if they are outwith your immediate
management chain (e.g. in an
NDPB.) In order to deliver these efficiencies,
continued focus by Scottish Water's Board
on delivering an efficient water and
sewerage service is needed. Continued
pressure from the Water Industry
Commissioner to improve Scottish Water's
efficiency in comparison with other water
companies is also required. |
10. Impact on Staffing to achieve the efficiency
gain | If there are to be any changes in
staff numbers (at activity level) to
achieve the efficiency gain, please
indicate how many full time equivalents and
how far you expect savings to be achieved
by natural wastage (show additions as + and
reductions as -). |
| 2005- 06 | 2006- 07 | 2007- 08 |
+ | | | |
- | | | |
Net | | | |
Explanation | Not yet finalised, but may involve
further voluntary redundancies. |
11. Benefits | In general, the benefits of the
Scottish Executive Efficiency Plan are the
enhanced outputs from the resources
Ministers have been able to allocate in
SR04. But if there is a direct connection
between this efficiency saving and the
enhancement of a particular service please
describe it here. These efficiencies savings fall outside
the Departmental Expenditure Limits.
Therefore, the benefit of these
efficiencies is reduced water prices to
Scottish Water customers. Water services
are being enhanced, and the assessment of
efficiency savings will take into account
the costs of providing the enhanced
service. |
12. Gross/Net Cash Savings | 12.1 Please set out the gross
recurring saving and any offsetting
recurring expenditure. Net operating efficiencies:
25m/35m/45m Net capital efficiencies:
50m/50m/50m |
12.2 Against what budget does this
expenditure and saving fall? The efficiency savings will be achieved
by action throughout Scottish Water's
business. The detail of how they will be
achieved will be set out in Scottish
Water's business plans. |
12.3 Has this saving been built
into your budget? Yes for 2005-06, and will be for the
subsequent years when the Strategic Review
of Charges is completed in the autumn. |
12.4 If so, what is the maximum
allowable expenditure against the budget
data, in each year, for that saving to be
delivered? For 2005-06, Scottish Water's maximum
revenue is just over 1 billion, with
maximum borrowing from the Executive of 181
million. For 2006-07 onwards, maximum revenue
from customers and borrowing from the
Executive will be finalised in November
2005, as the culmination of the Strategic
Review of Charges. The detail of how resources are
allocated to various budgets within the
business is set out in Scottish Water's
Business Plans. |
12.5 If not, how do you propose to
invest the additional cash back into public
services? N/A |
12.6 What plans do you have to
exceed the required saving? Explain by how
much in each year. Potential to exceed the required saving
will become clear on completion of the
Strategic Review process. |
13. Time - release savings | 13.1 Please explain any
time-releasing savings indicated at
question 3. N/A |
13.2 Please describe the method you
plan to use to calculate the cash
equivalent of those time release
savings. N/A |
14. Measurement and
Monitoring | 14.1 How are you proposing to
measure the expected efficiency benefits
(e.g. in terms of costs, level of output or
quality of service)? Expected outputs and quality of service
have been set by Ministers, and it is the
costs of delivering these outputs that will
be measured. |
14.2 What monitoring &
reporting procedures will be put in place
to measure the efficiency savings (How
often will progress towards the target be
monitored? Who will have lead
responsibility for reporting progress and
what procedures will be in place?) The existing monitoring and reporting
procedures of the Water Industry
Commissioner will be used to measure the
efficiency savings. Scottish Water provide
considerable cost and output information to
the Water Industry Commissioner throughout
the year, which the Commissioner uses to
analyse progress over time and to benchmark
Scottish Water against the performance of
English and Welsh water companies. The
Commissioner will report progress on both
operational and capital efficiencies for
the previous financial year in his Costs
and Performance report each autumn. |
14.3 Monitoring Data: Sources,
validation and risks - What data will be used to
measure progress? Is all the required
information quantifiable and readily
available? If not what action will be
taken to rectify this?
- What measures will be in place
to validate the accuracy of the data?
Who will take responsibility for this?
- Are there any issues or risks
relating to how you plan to use the
data? (e.g. accuracy, difficulties in
collection)
The existing economic regulatory
system for Scottish Water ensures that
the necessary data is already being
produced. It is validated by Reporters
acting for the Water Industry
Commissioner, engineering consultants
with a specific remit to validate the
accuracy of the information being
provided by Scottish Water. In his
subsequent analysis of the data, the
Commissioner takes into account the
confidence levels attached to the
accuracy of the data.
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