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
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
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.
2. COMMENTS ON
The following comments are made on key aspects
of the Bill.
(a) Environment Agency and Drinking Water
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) EmployeesKey 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
3. COMMENTS ON
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.
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.