'Sell Scottish Water and end £150m-a-year tax'

Published on Wednesday 7 April 2010 23:20

MINISTERS should remove Scottish Water from the public sector because they may soon be unable to afford the multi-million pound cost of repairing the country's antiquated network, a major independent report declares today.

The paper by the influential Centre for Public Policy for Regions says that keeping Scottish Water public is set to "act as a brake" on its ability to improve Scotland's supply system.

The unprecedented spending squeeze over the coming years will make it increasingly difficult for ministers to keep spending 150 million a year on the repairs.

The CPPR report comes after the man leading a review of the Scottish Government's budget said that taking Scottish Water out of the public sector was on the table as part of attempts to save money ahead of the squeeze.

Critics fear that, if hard decisions are not made, ministers will have to cut spending to schools, hospitals and other frontline services, as annual cuts of 3 per cent a year are introduced.

The CPPR report was written by Jo Armstrong, a former adviser to the Scottish Government. It was co-authored by John McLaren, a former Labour adviser.

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Mrs Armstrong said last night: "The report highlights that even though Scottish Water is a public sector success story, now may be the time to consider changing its ownership structure to ensure it continues to invest at optimal levels and to deliver further productivity improvements."

The report says that while the investment in repairs over recent years has reduced leakages, 40 per cent of water in the system – or 800 million litres of water a day – continues to leak out.

The report notes that, if ministers are unable to keep supplying it with funding, further repairs will be "severely delayed". It adds: "Allowing Scottish Water access to the private debt and/or capital markets must now be part of any budget review."

That is now being considered by the Independent Budget Review group set up by Finance Secretary John Swinney earlier this year.

Last night, a Scottish Government spokesman said: "This government's clear policy is that Scottish Water is performing well as a publicly-owned corporation and there are no plans to change that."

However, Derek Brownlee, finance spokesman for the Conservatives, said: "This is long overdue."

Labour deputy shadow finance spokesman David Whitton added: "We are more interested in the highly-paid executives of Scottish Water getting on with the job of delivering to their customers and tackling the problems caused by leakages. All of that can be done within the public sector."

A Scottish Water spokesperson said: "Any decision about the future governance or funding of Scottish Water is a matter for the Scottish Government."