Managing Change in the Water Industry: A Consultation Paper

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Foreword by Sarah Boyack, MSP, Minister for Transport and the Environment

This paper launches a public consultation exercise by the Scottish Executive about how we manage change in the Scottish water and sewerage sector. It sets out our views on changes in policy and legislation that may be necessary if Scottish water customers are to benefit fully from competition. The Executive is committed to our public sector water industry in Scotland. But it recognises that the industry must adapt if it is to succeed in meeting its customers’ demands in an increasingly competitive environment.

Competition in the Scottish water sector has been increasing for some time. Businesses are becoming more cost conscious. They are constantly looking for better and cheaper ways of sourcing utility services, including water and sewerage. As a result, the water authorities are already competing with private firms to meet the needs of many business customers.

The trend towards greater competition has so far been confined to services that do not require the use of the public water and sewerage networks operated by the water authorities. However, encouraged by the Competition Act 1998, third parties are now beginning to explore the possibility of using the water authorities’ networks to compete directly with the authorities in supplying customers on the public systems. It is therefore essential we have a robust regulatory framework.

As experience in the other utility sectors has shown, competition can deliver real benefits for customers. More competition will encourage innovation within the sector and consequent value for money for customers. It encourages efficiency and innovation in pursuit of improved services and keen prices.

I believe that competition in the Scottish water sector can be good for individual customers. Moreover, by helping to keep business costs down, it will be good for the economy and for employment in Scotland.

For these benefits to be enjoyed properly, a number of important issues need to be addressed. Clean drinking water and the safe disposal of wastewater play a crucial role in promoting social inclusion, in maintaining public health and in protecting the environment. We all rely on these services and it is essential that they are accessible and affordable to everyone. My colleagues and I are committed to ensuring that competition operates in the interests of all customers and in particular, that the interests of people on low incomes are protected.

This paper outlines the broad lines of our thinking on the changes that may be necessary if our objectives for the sector are to continue to be met.

In a separate exercise, the Executive is considering issues relating to the affordability of water charges for those on low incomes. We shall be consulting on this during the summer. The outcome of that exercise may have implications for the statutory framework, particularly in respect of charging arrangements.

The issues raised in this paper are complex. Getting them right is crucial if we are to benefit fully from competition. My colleagues and I are committed to the objectives of accessible and affordable water and sewerage services provided by a successful, modern public sector water industry. How these can be achieved and the benefits of competition secured for all customers is the subject of this consultation.

I hope that Managing Change in the Water Industry will be widely debated by those who work in and have experience of the industry and above all by those who use and rely on this vital service. My colleagues and I look forward to receiving comments that will help us to shape practical and effective policies for the challenges and opportunities that lie ahead.

Sarah Boyack MSP
Minister for Transport and the Environment
15 June 2000

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