Water Industry Commission for Scotland

The WIC is made up of a Chief Executive, Alan Sutherland, a Chairman, Sir Ian Byatt and four other members. Alan Sutherland is in charge of the day to day running of the WIC. Prior to the Commission there was a Water Industry Commissioner, who was Alan Sutherland himself. The remit of the WIC is to set budgets for Scottish Water to deliver the Ministerial Objectives. According to the WIC, ‘We have a statutory duty to achieve best value for customers. We do this by setting prices for water and sewerage services that deliver Ministers’ objectives for the water industry at the lowest reasonable overall cost’.

Neoliberal ideologues

The members of the WIC are all men with a not dissimilar background, which is rooted in economics and/or the private sector, either in the water industry itself or elsewhere. However, having the Commission made up of economists with an expert knowledge of the water industry is in line with recommendations by the Better Regulation Taskforce (BRT), a government appointed body made up of business people. They said in 2001 that: ‘The boards of regulatory bodies should include both executive and non-executive members. They should be appointed for their expertise rather than to represent stakeholder groups’^[1] .

The Executive, the Parliament and the Environment and Rural Affairs Committee in their scrutiny of the Water Services (Scotland) act (2005) supported this view when they voted for the change from a commissioner to a commission. There are concerns that the absence of stakeholders and the predominance of experts, namely economic experts with a neo-liberal ideology, may well make the regulator unresponsive to the needs of customers. It is also worth asking if having a tight coterie of experts from a similar simply entrenches homogeneity within the process and in effect is just the same as having only one commissioner. Further, there is genuine concern that the WIC may use their powerful position in the regulatory framework to shape an industry ripe for private takeover. Whilst the WIC may say that it is independent of the Executive, their backgrounds suggest that they are instinctively sympathetic to a marketised water industry. Further, and perhaps worryingly, as the chairman is appointed by the Executive, there is concern that the WIC is doing their bidding for the Scottish Executive and acting as a buffer for the Executive on politically controversial matters.

Their view that private competition is more effective and delivers results for customers is no secret. They said in their annual report for instance 'We have a role in facilitating competition in the Scottish Water industry. Competition will promote further efficiency gains and, where practicable, further choice for customers'. This belief in competition and the use of market principles in delivering water in Scotland is a thread running right throughout the Commission's annual report. Alan Sutherland states that 'Competition should bring lower prices and better services'. The report favourably reviews the water industry in England in contrast to Scotland and applauds the Scottish Executive for allowing incentives ‘to encourage good performance by Scottish Water…by linking managerial bonuses to (economic) outperformance of the regulatory contract’.

The WIC is central in the regulatory framework. It also has a pivotal and statutory role in the determination of charges. As described above this has effectively transferred this power to the WIC from the elected parliament. However, should Scottish Water feel aggrieved at the actions of the WIC they cannot appeal to the Scottish Executive, they must do so through the Competition Commission in London. There are serious concerns regarding this, voiced prominently by the STUC during the consultation process.

They said the Competition Commission:

Were simply not qualified to play that role in relation to a public service such as Scottish Water, which has clear political direction in relation to public policy. A political question arises as to whether it is the right for the judgments in relation to the balance between economic efficiency and public policy considerations to be arbitrated by a bunch of economists sitting in London.

It could also be argued that this could also be applied to the WIC, given that they too are economists with no interest in social and environment public policy considerations.

One of the key planks of the arguments for private sector involvement in water in Scotland is to suggest that privatisation has been an almost unqualified success in England and Wales. Indeed the English and Welsh models are often cited by the WIC as models Scotland should strive to emulate. As Alan Sutherland said in 2003.

The industry in England and Wales has proved that it is possible to deliver better service, water quality and environmental compliance for customers, while also making significant improvements in its level of efficiency. There is no reason why Scottish Water should not be able to achieve a similar level of performance for customers here in Scotland and so justify the public sector model for the industry in Scotland.

Alan Alexander, ex Chairman of Scottish Water, in his evidence to the Audit Committee of the Scottish Parliament confirmed the marketised structure of Scottish Water early this year when he gave evidence to the Audit Committee. He said;

It is extremely important to remember that the industry is a public sector industry, but we try to operate within the disciplines and constraints that have been successful in transforming the industry south of the border. Sir Ian knows more about that than anybody’.

The Commission

• Ian Byatt was Director General of the Office of Water Services (Ofwat) between 1989 and 2000. In that role he was responsible for independent economic regulation of the water

companies in England & Wales. From 1978 to 1989 he served in HM Treasury as Deputy Chief Economic Adviser. Since 2000 he has advised the World Bank and governments around the world on matters relating to the water industry. Sir Ian, who was an adviser to the Water Industry Commissioner from 2002, was knighted in 2000.

• Professor John K Baynard OBE

Professor Banyard is a chartered engineer who retired in December 2004 as an Executive Director of Severn Trent Plc following a career in the water industry. His particular areas of responsibility were the design and management of the capital programme, the day-to-day operation of the company’s infrastructure, and R&D. He also acted as an adviser to the Water Industry Commissioner for Scotland from January 2005.

• Professor David Simpson,Deputy Chairman

Professor Simpson was economic adviser to Standard Life from 1988 to 2001. He was the founding Director of the Fraser of Allander Institute at the University of Strathclyde and is a Trustee of the David Hume Institute. Professor Simpson acted as an adviser to the former Water Industry Commissioner for Scotland from 2002.

• DR Mike Brooker

Dr Brooker is a scientist who recently retired as Chief Executive of Welsh Water following a career in the water industry in Wales. During his career he was Chief Scientist and subsequently Divisional Operations Director of Welsh Water before becoming Managing Director in 1996.

• Alan Sutherland, Chief Executive

Alan Sutherland was the Water Industry Commissioner from November 1999, when the position was created. During that time, he developed a framework for economic regulation of Scottish Water. He has extensive experience in management consultancy andin the investment banking industry, being a former management consultant with Bain and Company and before that a Manager with Robert Fleming and Company. More recently he was a Managing Director of Wolverine CIS Ltd, a division of Wolverine World Wide.

• Charles Coulthard

Charles Coulthard retired recently as Managing Director of Ofgem (the Gas and Electricity regulator) in Scotland. He served as Deputy Director of the Office for the Regulation of Electricity and Gas in Northern Ireland between 1992 and 1999. He is also currently the Chair of the Gas and Electricity Consumers Council in Scotland.

Source, WIC annual report 2006

Notes

1. ^ Better Regulation Taskforce,'Economic regulators', 2001,

http://www.brtf.gov.uk/taskforce/reports/BRTF%20Economic%20Regulation.pdf