FEARS were mounting last night that ministers were preparing to hand a £350 million contract to supply water to Scotland’s schools, hospitals, prisons and Government offices to an English private water company. 

Alison Johnstone, Scottish Green MSP for Lothian, has lodged a motion in the Scottish Parliament saying she was “appalled” the major deal could go to Anglian Water – a company based in East Anglia and owned by an international consortium.

Last year, an investigation by the independent research group Corporate Watch raised concerns that Anglian was among a number of English water companies using offshore havens in connection with their tax affairs.

Water to around 100 Scots councils, hospitals, universities and prisons as well as the Scottish Parliament is currently supplied by Edinburgh-based Business Stream, an offshoot of publicly-owned Scottish Water.

“It is deeply concerning the Scottish Government appears to be about to award this massive contract, worth £350m over three years, to Anglian Water, so any profits will flow out of the Scottish economy,” said Johnstone.

“At the moment the billing and servicing of water for council buildings, hospitals, universities, prisons and the Scottish Parliament is carried out by Business Stream, so any profits come back to publicly-owned Scottish Water.”

She added: “Scotland’s water is a great asset, as are the skills of the industry, and we should be harnessing these for the public good, not lining shareholders’ pockets.”

Her motion, which has been signed by three Green MSPs and the Labour MSP Neil Findlay, called for water services to remain in public hands and said that public contracts should benefit the common good, not contribute to corporate profit.

Scottish Water is publicly owned and supplies the domestic market. But in 2008 the Scottish Government privatised the non-domestic market – worth around £330m – and Business Stream was set up to bid for contracts from those needing water in the commercial and public sector.

The £350m contract to supply mains water and sewage services to more than 100 public sector organisations was agreed and put out to tender by First Minister Nicola Sturgeon last August when she was Minister for Infrastructure, Investment and Cities. 

Dave Watson, Scottish organiser at Unison, said: “Scotland is very proud of its public water service. Scots voted for a public water service. They didn’t vote for it to be managed by a private water company in East Anglia.”

He added that a large amount of work was currently being given by Scottish Water to private water companies to carry out capital projects – and the Anglian contract would be evidence of further “creeping” privatisation..

“Scottish Water has been a huge success story. We get our water cheaper than our English counterparts – and that is largely because it is a public service," he said.

Watson, who is also concerned about the potential impact on Scottish jobs, added: “We would urge the Scottish Government to do everything in its power to ensure that Scotland’s water is run from Scotland and not East Anglia.” 

An Anglian Water spokeswoman declined to comment on the contract, however she insisted the company paid all the UK taxes it was obliged to. 

“Anglian Water makes a huge contribution to the regional and national economy, and last year paid £167m directly and indirectly in different taxes,” she said. “Our corporation tax bill is reduced by specific Government incentives, and deferred not avoided. This is encouraged by Government to stimulate long-term investment in infrastructure and jobs.”

She added: “For tax purposes we are registered in the UK, and we pay our full tax liability in accordance with government rules. Interest payments made on Eurobonds to overseas lenders do not attract tax in the UK. The UK Government has concluded that any tax lost as a result is outweighed by the benefits the UK economy gets from the investment they attract.”

She added: “Eurobonds allow us to raise the very large sums of money needed to improve and maintain our infrastructure without increasing customers’ bills. They make the UK an attractive place for foreign investors, supporting economic recovery, growth and job creation.

"Our Eurobonds have also been looked at twice by HMRC who decided the terms were appropriate.”

Scottish Water declined to comment.

A spokesperson for the Scottish Government said: “The procurement process is still in-phase so it is inappropriate to make any comment at this stage.  Once this formal process is complete and the contract awarded we will be able to share the results.

“As a result of legislation introduced in 2005 by the previous administration, that was passed with wide cross-party support, Scotland has had a fully competitive water market for commercial and public sector customers since 2008.

“Regardless of any outcome of this process, the Scottish Government will keep Scottish Water in public hands and Scottish Water will continue to produce all mains water used in Scotland."