In the aftermath of the UK Government’s Pre-Budget Report , there appears to be a consensus that sharp cuts in public expenditure will be required. The debate appears now to be principally about the timing and extent of the cuts that will be required.

The Commission has consistently taken a prudent view in its financing of Scottish Water, seeking to ensure that it remains financially sustainable. For this approach to operate in the interests of customers, the Scottish Government must, in a timely manner, make the level of borrowing set out in the Determination available  and must not seek to withdraw resources from Scottish Water until, at the earliest, the end of the next regulatory control period. It is only at this time that it will have become clear whether Scottish Water will have outperformed the 2010-15 Determination.

Given that Scottish Water is financed to pay a market rate of interest, there should be no reason why debt finance required by Scottish Water should not be made available.

Anna Walker has published the final report of her independent review of charging for water and sewerage services. She is right to highlight that bills need to remain affordable if there is to continue to be the required consensus on investing to improve our environment. She may also be right that metering is the fairest and most effective way to charge customers for their use. But there is devil in the detail: what tariffs are proposed?; what differences between customers will be tolerated?; Do/Will meter charges recover the full cost of metering and the service provided?

Metering is often chosen now because a household could reduce its bill- there is nothing wrong with that provided that they pay a reasonable price for the service that is provided. Metering adds about 10% to the average household bill; so if it encourages savings of broadly the same magnitude then it is beneficial. But as people switch from a tariff structure which deliberately contained a not insubstantial degree of social protection, how are those who benefitted to be protected when those who have opted to a meter no longer contribute? This is a matter for Government to resolve- not water companies and not regulators.

Anna Walker rightly suggests that the problem will become more acute. The differential between measured and unmeasured average bills continues to grow. Anna highlights the issue in the SouthWest, but it is becoming more common in other areas too.

This will encourage households to switch and leave those who pay the unmeasured rate with an ever higher bill. This will threaten the investment that the industry needs.

I regard investment in improving our environment and Scotland’s water industry as extremely important. But such investment will only be sustainable in the longer term if customers are prepared to pay for the cost of these improvements in their water and sewerage bills. In my view there are three principal factors, which should help to ensure that there remains a consensus about the need to invest in improving Scotland’s water industry. Firstly, bills should not increase at more than the rate of inflation or growth in average incomes (whichever is the lower); second, there needs to be high degree of certainty that the investment financed by customers will result in the desired outcome; and thirdly, investments should be prioritised using transparent cost and benefit criteria.

In the case of the proposed investment at Loch Ryan, I have seen no evidence, which suggests that the proposed investment will result in the loch complying with the Shellfish Waters Directive. Indeed, it is likely that spills from the sewerage system around Loch Ryan, agricultural run-off and poor quality discharges from septic tanks could combine to ensure that the Shellfish Water standards are not met. The UK would then remain open to infraction proceedings, but some £30 million of customers’ money will have been spent. And is it really worth the cost, when the local community will face substantial disruption and there will be a marked increase in Scottish Water’s carbon emissions just because there is a very small oyster fishery locally?