Sharks in Scotland's water, again!

This week we had one of the periodic attempts to put the privatisation of Scottish Water onto the political agenda.

This time it was CBI Scotland as part of their budget submission, supported by the Tories and Liberal Democrats. In fairness to the CBI, and I don't often feel the need to be fair to them, they tell it as it is. Outright privatisation is their option and they have members in the form of, mostly overseas, private water companies who would love to get their hands on Scottish Water. The crazy regulatory system mirrors the privatised system in England and Wales and if Scottish Water was in private hands it would immediately be a takeover target  by Veolia or one of the other big players in the industry. The Reid Foundation has recently published further work by Jim and Margaret Cuthbert on utility pricing that explains this in some detail.

Willie Rennie and the Scottish Liberal Democrats popped up as usual to tell us that the solution is a Public Interest Company. I am never quite sure if they really believe that this is different to privatisation, or that they are simply ignorant of how the industry works. Mutual solutions, like a PIC, can work in people intensive services. But in a capital intensive industry like water you have to raise huge amounts of capital. Scottish Water has a £500m capital programme every year. This means the banks call the shots, not some cosmetic consumer representation on a PIC board. The banks want low risk and therefore the service delivery is privatised. This is what happens in the only UK model of this type, Welsh Water.

We are fortunate to have a broad political consensus between Scottish Labour and the SNP on this issue. I suspect John Swinney is more persuaded by the financial than the public service arguments, but that's fine because they are equally strong. Selling off Scottish Water for £1.5bn, when it has a capital value of at least £20bn, makes "selling off the family silver" something of an understatement. As the cash would then be pocketed by the Treasury - probably seals the argument as far as the Cabinet Secretary is concerned.

There is a debate to be had about Scottish Water in the context of the Hydro Nation concept. I would argue we could be much more radical here than the very modest Bill proposed by the Scottish Government. In particular, we should strengthen the democratic accountability of Scottish Water and take away the costly and damaging regulatory system. More on this in the UNISON submission to the draft Bill and consultation.

However much we may want to improve Scottish Water, our first task to to defend our public service against the sharks who would privatise it. Privatisation would result in a loss of accountability as Ministers pass the buck to a private water company that would have a legal duty to maximise share holder value at the expense of the public. The charge payer would be forced to pay for the higher costs of borrowing, billing systems etc. in addition to the cost of dividends and the fat cat salaries of Directors. The corporate financiers, consultants, regulators and others will all gain at the charge payers' expense.

So we must remain vigilant. It's Scotland's water and it's not for sale!