Going with the flow

Alf Young
on how best to protect a
vital national resource

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Bob’s People
Ed and Andy

Literally shafted

George Gunn
on the links between Chile’s trapped miners and the poor of Scotland

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Film
Dharmendra Singh on ‘Inception’

Harold and the yellow submarine

Islay McLeod
meets a man who captured a WMD

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Rear Window
Alice’s story

Bob’s People

The Brothers II

This is Ed. He is the second favourite to be the next leader of the Labour Party behind his brother David. But there is another Ed in the running. Bob will bring you him on Tuesday.
     Meanwhile, whatever happened to Andy Murray? Although he wasn’t in the running for the Labour leadership (apart from anything else, he isn’t called Ed) he was expected to do rather well in the US Open.

www.bobsmithart.com

SR recommends

For biographical reference:
whoswhoinscotland.com

For lively discussion of current politics:
scotlandquovadis.net

For intelligent comment on Scottish literature:
scottishreviewof books.org

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North Berwick, by
Islay McLeod

Going with the flow

Alf Young

Scottish Water’s Black Esk reservoir

I don’t think the Scottish National Party has a Clause IV in its constitution. If it has, it’s certainly not about ‘the common ownership of the means of production, distribution and exchange, and the best obtainable system of popular administration and control of each industry or service’. The clause containing those words, drafted by Sidney Webb for the Labour Party in 1918, was refined in 1944 into a policy of ‘public ownership’ of the commanding heights of the economy, then abandoned in 1995 by Tony Blair and his New Labour modernisers.

     But while the SNP has no equivalent to Claude IV, it still clings tenaciously to the virtues of public ownership in one specific service industry – the supply of water and related services. Yesterday, in its last programme for government for this Holyrood parliament, Scotland’s minority government promised a Scottish Water Bill which, it believes, will demonstrate ‘how a public ownership model can match and even exceed alternative ownership structures’, in a market-driven world.
     That was the big surprise in a legislative programme otherwise notable for the well-trailed absence of any measure to facilitate a referendum on Scottish independence. Water, said the first minister, is ‘our greatest natural asset’. So, if the SNP has its way, it will not only stay ‘in public hands’. It will be given the commercial freedom to become ‘a great Scottish company, in public ownership’. It would be another world first.
     Summoning up the legacy of Labour’s wartime secretary of state for Scotland, Tom Johnston and the words of two recently departed Scots, Edwin Morgan and Jimmy Reid, Alex Salmond painted a lyrical picture of Scotland becoming the world’s first hydro economy, harnessing compassion and innovation to create a publicly-owned legacy for our children and beyond.

If a publicly-owned Scottish Water is to get even more money from government to fund the building of windfarms or hydro schemes on the 80,000 acres of Scotland it owns, other neglected parts of the public realm are bound to lose out.

     However, while the pledge on Scottish Water is that it will not be privatised or even mutualised, keeping it in public ownership while encouraging it to expand its commercial reach into renewable energy and beyond, comes at a significant financial cost above and beyond the £140m the Scottish Government already lends the business each year to renew the crumbling infrastructure it inherited in its mainstream businesses.
     Against the backdrop of the public spending cuts to come that’s, on the face of it, a very significant commitment. On the latest estimates, the cuts to be announced next month will carve some £3.7bn out of the current devolved Scottish budget in real terms by 2014/15. Capital spending, where Scottish Water borrowing is concentrated, will be hit nearly three times as hard as revenue spending. And, because almost all the water industry in the rest of the UK was privatised years ago, there are no Barnett consequentials to fall back on to fund even exiting borrowing.
     If a publicly-owned Scottish Water is to get even more money from government to fund the building of windfarms or hydro schemes on the 80,000 acres of Scotland it owns, other neglected parts of the public realm are bound to lose out. And if, as Mr Salmond insists, water charges are to remain stable throughout the cuts period, the pain elsewhere can only intensify.
     As the SNP’s own Scottish Futures Trust (SFT) pointed out in July, Scottish Water already accounts for 5% of Holyrood’s capital budget, a figure that will double as capital budgets overall shrink. Funding outstanding issues, like Glasgow’s Victorian sewer network, will put even more pressure on competing investment priorities like roads and schools.
     The trust points out that, if Scottish Water continues to be owned directly by government, but is to become less dependent on the public purse for funding that can only happen through some combination of reductions in investment or increases in water charges, ‘both of which are equally unpalatable’. But here we are, after yesterday’s announcement of plans to turn Scottish Water into a major player in other sectors like renewable energy, moving in the opposite direction, piling funding commitment on funding commitment.
     Or are we? While the first minister explicitly ruled out privatisation or even mutualisation of Scottish Water yesterday, all his talk of the virtues of ‘public ownership’ said nothing about a third option that has been canvassed by both his Scottish Futures Trust and this summer’s independent budget review, chaired by one of Mr Salmond’s economic advisers, Crawford Beveridge.
     That option is to turn Scottish Water into what the SFT calls a public benefit corporation and the budget review panel calls a public interest company – a not-for-profit company limited by guarantee where customers receive any distributed surpluses as dividends.
     The only other example of this structure currently operating in the water industry in the UK is Glas Cymru, the owner of Welsh Water. In other areas of activity, parallels can be found in Network Rail, many housing associations, Nominet UK, the internet domain name registry, the Big Issue, part of Oxfam, the Eden Project and even the England and Wales Cricket Board.

Given the not-for-profit ethos, it would be ownership for the people by a public interest company. But would it, in the first minister’s words, be
public ownership?

     Were Scottish Water to be taken down this route, the biggest consequences would be two-fold. All the company’s accumulated borrowing from government would be replaced by private investment, easing some of the pressure from the cuts to come. Fresh capital would be sourced in the marketplace. And Scottish Water would no longer feature as a government enterprise in the national accounts with the Scottish government relinquishing the control it currently enjoys.
     Some £2.75bn of historic borrowing pre and post-devolution would be repaid to the Scottish and UK governments. The ongoing £140m borrowing requirement for infrastructure investment would come not from the Scottish budget but from banks or capital markets in the form of debt or bonds. Expansion into areas like renewables would have to be funded in the same way.
     If Scottish Water were to follow the Glas Cymru model exactly, it might even outsource almost all of its day-to-day operations to private sector contractors and become essentially a holding company.
     Given the not-for-profit ethos, it would be ownership for the people by a public interest company. But would it, in the first minister’s words, be public ownership? That is debatable. We won’t even know, until the terms of the promised Scottish Water Bill are published, whether Mr Salmond is indeed minded to heed the advice of his own Futures Trust or the budget review panel. Or whether, in the face of what he has called the hurricane of London-imposed cuts to come, he really is invoking the spirit of Sidney Webb, Tom Johnston and Jimmy Reid.