Meeting of the Parliament 04 September 2025
I join members in thanking the Public Audit Committee. I am not a member of the committee, although I sit on the Scottish Commission for Public Audit. The work that the Auditor General for Scotland has done underlines the importance of Audit Scotland and the AGS. I thank the convener for his powerful comments at the beginning of the debate.
Reading the committee’s report, the word “egregious” springs to mind. At the root of a raft of bad decisions by WICS, there was clearly a lack of focus on its core role as a public body and a deep cultural problem within the organisation. WICS had been encouraged by the Scottish Government to expand its remit into acting as a private sector consultancy on the international stage. Unfortunately, with that came a total indifference to upholding the standards that are required of a public body. There should have been no confusion at all on the part of the chief executive officer, the chair and the board—they should all have known better. The Scottish Government’s arrangements should have worked to rein in excessive and inappropriate spending from day 1, and the Government should have heard the alarm bells ringing far earlier.
The fact that the chief executive officer at the time resigned to avoid scrutiny by the Public Audit Committee is distasteful—that his pay-off cost the taxpayer more than £100,000 even more so. The £70,000 Harvard training courses, funded masters in business administration, £200 dinners and Christmas gifts are all symptoms of an organisation that had lost its sense of responsibility to act in the public interest and deliver value. The whole affair has undermined trust in the regulator and has been damaging to the water industry in Scotland more broadly. However, I am pleased that lessons have now, belatedly, been learned. The organisation has been refocused back on to its public role and will move forward, with further monitoring from the Auditor General.
As Sarah Boyack outlined, now is the time for a renewed focus on the water industry and its regulators. It is 20 years since the Water Environment and Water Services (Scotland) Act 2003 was passed, which established WICS. We are also in the early days of a climate crisis that will be driving huge investment decisions for generations to come. The director general net zero told the committee that WICS provides
“the impetus to deliver on efficiency savings, reduced taxpayer bills and the improvement of the asset”,—[Official Report, Public Audit Committee, 19 February 2025; c 68.]
but there is no fundamental reason why that impetus cannot come directly from Government, with no economic regulator in place. Arguably, WICS helped to bring a focus to Scottish Water in those early days, especially in reducing costs and improving performance. However, is it still fit for purpose? Why cannot that regulatory capacity be built within Government? Other states around the world regulate their nationalised utilities by Governments setting out formal agreements on performance, pricing and other obligations. They manage to focus on improving governance, robust auditing and citizen engagement, without an economic regulator. They manage to get the balance right between the necessary technical decisions and the more political choices.
When WICS was established, at a time when the Scottish Executive was flirting with privatisation, Ross Finnie, the Lib Dem minister, was keen on turning Scottish Water into a mutual, like Welsh Water—public on the outside and private on the inside. In effect, it would have been a public shell company with a business being operated by private contractors. I can see the benefit of an economic regulator in that context, but that is not a model that was ever fit for Scotland. Moreover, the context of the water industry has changed dramatically around the United Kingdom, even in just the past couple of years. With a water bill inevitable in the next session of the Scottish Parliament and further regulatory reforms coming in England, it is time to consider whether WICS is still fit for purpose.
It is a separate issue from the historical bad practice that the Auditor General has reported on, and it should remain so, but there are broader questions about the future of water industry regulation in Scotland, and we should not be afraid to discuss them.