Select Committee on Environment, Transport and Regional Affairs Memoranda

Memorandum by UNISON (DWB 08)


  UNISON welcomes the broad principles encompassed within the draft Water Bill, many of which we have long campaigned. UNISON is the largest union in the industry both in the water plcs and the Environment Agency and our members are key stakeholders in the areas covered by the Bill. They have a unique insight into the possible impact of the Bill on consumers, the environment and their own future. In particular UNISON welcomes;

    —  The tightening of the abstraction and licensing systems and placing sustainability and environmental protection at the heart of the legislation.

    —  The introduction of a Water Advisory Panel to give technical and other advice to the Regulator, if requested.

    —  The creation of an independent Consumer Council for water with duties, to keep informed, provide advice, publish information and the power to investigate and help resolve complaints.

    —  Placing a primary duty on the regulator to protect customer interests and in particular to have regard to the interests of disadvantaged groups.

    —  To increase the penalty available in magistrate courts to £20,000.

    —  The requirement on water undertakers to further the objective of Water Conservation.

    —  The duty on the Secretary of State and Welsh Assembly to publish the reasons for decision and to bring these to attention of persons likely to be interested.

  The consultation paper on the Water Bill makes reference to "Work in Progress" on the issue of increasing competition in the industry, also on the proposals to change company structures. UNISON is concerned that these matters which could have a serious impact on the consumers, their health and the environment are being dealt with in a series of Ad hoc consultative papers and have never been subject to full scrutiny in the House of Commons or its committees. Along with other stakeholder organisations we believe that such a review is required prior to authorisation of any further changes to competition and company structures.


  The following comments are made on key aspects of the Bill.

(a)  Environment Agency and Drinking Water Inspectorate.

  To achieve the legislative objectives stated in the Bill, including improving sustainability and protecting the environment, requires that all of the regulatory bodies have sufficient resources in terms of staffing. UNISON trusts that the Government will ensure that adequate resources are made available to these agencies.

(b)  Health and Safety of the Public and Employees.

  The water industry has lost between 25,000 to 40,000 jobs since 1987, almost half its total jobs. Some of this can be accounted for through normal efficiency improvements and others outsourcing certain functions to non-core or other companies. UNISON in recent years has become concerned that an increasing number of jobs are being lost through companies reappraising risk and discounting it over a longer time period. This has the impact of cutting jobs and delaying the renewal of assets. Ultimately it increases the risk which the public, contractors and employees face. The danger of such incremental increasing of risk is that it is not fully appreciated at the time, until a major incident occurs. The water industry history has had its share of these. In the Utility Act 2000 both the Gas industry and the Electricity industry have Clauses in the Act which requires the Secretary of State to consult with the Health and Safety Executive on relevant issues. The water industry for historic reasons has never had such a provision and this is reflected in the draft Bill. Whilst UNISON welcomes the increases in the fines available to magistrates for breaches in regulations, we believe that a more proactive approach is required on this matter. It is UNISON's view that within the Bill there should be, either a requirement to consult the Health and Safety Executive on relevant issues, or there should be requirement on the Secretary of State/Regulator to satisfy themselves that companies are renewing assets and have sufficient personnel to guarantee that the Health and Safety of the public are not being put at risk. Further the information provided by the companies to substantiate these assurances should be made available for public scrutiny.

(c)  Independent Water Consumer Council

  UNISON welcomes the creation of the Water Consumer Council and the powers given to it in the Bill. We believe that the key to consumer protection and fair regulation lies in greater openness and transparency in information. In this regard we feel that the Bill could have been stronger in giving the consumers' body greater powers to obtain information from companies, investigate issues and publish information. It is our view that the balance of the powers in the legislation errs too much towards making the Consumer Council justify the need for information or to seek agreement with the companies to publish information and not sufficient towards the needs of consumers who should be entitled to have such information made public. We recognise the commercial confidentiality argument but we are not convinced that in many circumstances such confidentiality can be justified. In this regard we would support the consumer organisations in seeking less restrictive clauses in the Bill.

(d)  Directors Pay and Standards of Performance

  UNISON believes the requirement on companies to publish details of any link between Directors' pay and the levels of customers' services attained are correct. Ideally, and over time, these standards should be the same across the country. Whilst we recognise that at this stage such a measurement will be fairly crude, it is a clear signal to both customers and companies, that the board room excesses in the early years of privatisation are not acceptable in a public service company.

(e)  Employees—Key Stakeholders

  The water industry relies heavily on the skill and dedication of the workforce it employs. The industry provides an essential public service and requires a partnership of all stakeholders to succeed. It is understood that it is difficult within the legislation and the consultative documents to recognise the contribution made by employees. They are however key stakeholders and it is important that the employee's contribution is recognised alongside other stakeholders when seeking views and making appointments to consumer, consultative and advisory bodies throughout the industry.

(f)  Reasons for Decisions

  UNISON is pleased that the Bill reflects the change originally made in the Utility Bill 2000 requiring the Director/Secretary of State/Assembly to publish the reasons for decisions to interested parties. Clearly UNISON would wish it recognised that the trade unions in the industry are such interested parties.


  In the draft consultative document there is comment on certain work in progress in terms of competition and in relation to proposed changes in company structures. UNISON has responded to all these consultative papers but we are concerned that the issues are being looked at incrementally rather than being looked at as a whole. The structure of the water industry has changed a great deal since it was privatised, and some of the proposals now being examined will have an even more profound change in the industry. These changes now require public scrutiny before they are implemented and before the public interest is submerged to the needs of equity and bond markets.

  UNISON believes that such a scrutiny needs to be done in a separate Committee of Inquiry.

(a)  Competition

  The water industry has always had some degree of competition including outsourcing of work and that process has continued since privatisation. The water industry differs from most other industries, including the other utilities, and does not lend itself readily to simple market solutions. The key tests for water must be whether allowing further significant changes in competition at this stage is in the interests of the customer, the environment and public health and safety in both short and long term. UNISON members working in the industry doubt whether a further bout of induced competition into the water industry will pass that test. Indeed we believe that prior to any significant changes in competition being allowed by the Secretary of State/Director that it should be incumbent on those proposing such changes to demonstrate the real benefits which they believe will be achieved, and that these should be made available for public debate prior to these being sanctioned. We would argue that it could be an expensive and dangerous assumption to believe that increased competition is the primary solution to the difficulties faced by the current water regulatory regime and the challenges faced by the industry today. We would argue for caution prior to sanctioning any significant change in this respect.

(b)  Industry Restructuring Proposals

  In recent years we have had a number of restructuring and take-over proposals which a have been subject to OFWAT consultation. All to some extent have sought to test what is permissible in the current regulatory structure and ultimately to seek to improve the profitability of the companies concerned. The regulator has of course judged these against various criteria including the ability to have enough comparable information to regulate the industry and the benefits to the customer. Whilst each judgement may have made sense by itself, 11 years after privatisation the overall picture needs to be reviewed. More recently the proposals being made are structured round the concept of splitting asset ownership and operational management. In the Kelda proposal this was through a mutual scheme, and in the current Glas Cymru proposal through a non-profit making trust. Should this be allowed it is likely that this will signal the start of a major change in the UK water industry structure. UNISON has never fully been convinced that the equity-based model of the water industry was best for the customer. Indeed we have always believed that privatisation of the industry was wrong. In this regard we have some sympathy with proposals based on mutual or non-profit making trusts. We have serious concerns however, that the current proposals are based more on the interest of the bond markets and current owners, rather than a rational appraisal of the benefits to customers. Indeed the concept of these new ownership structures as proposed contracting out their operations to five or six main contractors and many more sub-contractors might make safety issues of Railtrack problems look small. Indeed we have grave doubts as to whether it would produce any efficiencies for the customers or the environment. Such a disaggregated system would require considerable resources to be retained in the asset ownership company to appraise and monitor contracts, and to ensure compliance with their licence conditions. Further, the risk to the public and their health and safety could be considerably increased if such a comprehensive monitoring regime was not in place. Faced with this position, there is a strong case to be made that in the initial stages the operational capability should be maintained within the mutual, the trust or asset-owning company, or alternatively that the whole operations contract should be put out to tender as a single contract. All of these issues need to be examined and point we believe to a full inquiry into the industry prior to any further changes in competition or structure.


  The above submissions cover the main issues in the Bill including the work in progress. UNISON members and all employees working in the industry have invested much of their lives to the industry. Between them they have considerable intellectual capital, knowledge and skills. A fact not reflected in any water company balance sheet, but without which the water services and the health and safety of the public would be considerably at risk. It is important, therefore, in any decisions which affect the structure of the industry that the legitimate needs of employees are addressed. Further, that the intellectual capital, skills and knowledge are not diluted or undervalued for some quick fix solution which may be to the long term cost to the consumer, environment and the industry itself.

Janauary 2001

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