New Statesman Scotland
When privatisation swept away all of the municipal waterworks into shiny new PLCs, Scotland was exempted. The then Secretary of State for Scotland, Malcolm Rifkind, believed it would alarm Scotland's socialist establishment too much to remove institutions that were powerful symbols.
This decision to allow Scotland to opt out of the liberalisation of the water supply industry was repeated by Rifkind's successor, Ian Lang, in 1992. Even the bold privatiser Michael Forsyth deferred any decision in 1997 just before the Tories were washed away in the general election.
How odd, then, that a new Labour government with a formidable majority in Westminster, and Lib Dem allies in Holyrood who have no enthusiasm for free market ideas, should be the ones to open up Scotland's water monopolies to competition. Sarah Boyack, the Environment Minister in the Scottish Executive, has said that she favours a public sector status for Scotland's civic water but that she is being overruled by two greater powers - EU law and UK competition law.
The notion of "common carrier" has swept through the gas, telecoms and electricity markets. The same is now being applied to water. From 1 March, every household will be able to choose to switch its water supplier. The psychological block to competition was the evidently absurd notion of a duplicated, triplicated or multiple supply of gas pipes, telephone wires or electricity cables up every street. Privatisation gurus established that the supplying could be done to the existing network with competition at source.
As Boyack had authorised increases of up to 35 per cent for some Scottish households, she is going to look clumsy if she tries to bar cheaper suppliers. In the beginning, it is more likely to be industrial users of high volumes of water who will switch to alternative suppliers.
With water an asset no Scot can claim is rare, it has always been an anomaly to preserve a less than entrepreneurial supply system. To conform to EU water purity stipulations, Scottish water agencies need massive new investment. Private capital will seek enhanced efficiency in exchange for its assistance. Boyack looks powerless to preserve her instinctive old Labour feelings.
All these changes are time bombs set ticking by the late Professor Donald Denman,who lobbied the Scottish Office (as it was then called) to create a water market. Denman died last autumn but an astonishing fact about him was the identity of his "bidey-in" in his house on the banks of the Tweed near Peebles. He shared his household with Svetlana Stalin, daughter of the greatest exponent of state monopoly.
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