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Public Audit and Post-legislative Scrutiny Committee 18 March 2021

18 Mar 2021 · S5 · Public Audit and Post-legislative Scrutiny Committee

Item of business

Section 22 Report

“The 2019/20 audit of Scottish Water”

Dame Susan Rice Watch on SPTV

Yes, I can. It is a helpful question; let me see whether I can give an answer that explains it. I will come at it from two directions. First, Scottish Water is just about the biggest organisation in Scotland. If it was a company, it would the biggest. It is performance driven. It is set extremely challenging targets in a range of different areas, and those targets are not set from within but by the regulator, so they are genuinely challenging. It has to deliver to very high standards and provide excellent service, all for the benefit of customers. The targets all undergo a strict verification process, and the results are signed off by external regulators, to confirm that we have either met or outperformed those targets. There are more elements to it, but what I am saying is that there is a rigorous process around the expectations for performance in Scottish Water. You mentioned the NHS. I do not know the NHS well in any sense but I can make a bit of a comparison that might help to explain things. Scottish Water’s goal is to attract and retain high-quality individuals who have experience and capability at all levels, including, obviously, the most senior levels, so that we can deliver what we want Scottish Water to deliver. Those people will be part of a much wider market. They are not civil servants, although I do not say that in any negative way at all. The people who can run a business such as Scottish Water are perhaps not people who have worked in other areas. Scottish Water is a huge infrastructure business that involves a massive investment programme. As I said before, operationally, its job is to deliver safe, constantly flowing water and to manage waste water and flood waters right across Scotland. It also has a massive scientific base. We need our executives and other staff to have all those skills, and we need to look outside to ensure that we are getting in a good mix of individuals. People need experience and background in this space, so we hire either from within the organisation or from a pool of those who have experience in this area. That might be different in other areas. I will make a comparison with the NHS that might help people to understand why there is an annual performance incentive programme and a longer-term incentive programme. As I understand it, in the NHS there is a large budget and an overall chief executive. However, I believe that there are a number of health boards around the country and each of those has responsibility for its catchment, which is quite right, and for the budget in that area, and I believe that there are senior executives in each of those health boards. I think that around two thirds or 70 per cent of the NHS budget is related to staff costs and benefits. You would expect that, because healthcare is delivered by people, so you need lots of people. In Scottish Water, there is a different situation. We have one senior team and one chief executive for the whole business, and I think that about 15 per cent of our budget relates to staff compensation, whether through benefits or salary. Most of the budget of Scottish Water is funding that has to be managed cleverly, efficiently and effectively by the people in Scottish Water. That is a very different level of responsibility, and we want to be sure that they manage those funds in a way that gives best value, manages risk appropriately and is compliant with all public sector expectations.

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Public Audit and Post-legislative Scrutiny Committee 18 March 2021

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