SCOTTISH ministers yesterday came under fire for awarding a £360m contract for supplying water to all the country’s schools, hospitals and councils to a private company which paid no corporation tax last year.
After months of delay Nicola Sturgeon’s government, whose hands were tied to some extent, handed the four-year deal to Anglian Water, a firm based in the south of England and owned by an international consortium.
Ministers said the East Anglia-based firm had substantially outbid the publicly-owned company Scottish Water.
They defended the deal, insisting it would save public services up to £40m over the expected lifetime of the contract, and protect jobs, but also suggested it was a contract the government was forced to accept under existing tendering rules.
“This is the best deal for Scotland under the rules that bind us, and this contract will save public bodies up to £10m annually for the initial three year period of the contract with the option to extend for a further 12 months,” said Keith Brown, cabinet secretary for infrastructure, investment and cities.
“Legislation introduced by a previous administration to safeguard the public status of Scottish Water requires us to tender out these services.
“But we have ensured that Scottish Water remains in public hands, and we have secured the best possible deal to ensure Scotland benefits.”
However, opposition politicians and the trade unions said SNP ministers – who have attacked the privatisation of the public sector in England – could have done more to keep the contract in public hands.
“This was an opportunity to prevent the supply of water services to Scotland’s public sector falling into the hands of a private firm whose profits won’t benefit the Scottish economy, and specifically a company that paid no corporation tax this year yet handed shareholders a £180m dividend,” said Patrick Harvie, economy spokesman for the Scottish Greens.
“The market for business customers in Scotland was opened up due to competition legislation brought in by Tony Blair’s government. Scottish ministers must show determination to defend the public sector’s role in Scotland’s economy.”
Willie Rennie, Scottish LibDems leader said the government had “exaggerated” the savings in the new deal. This is a private-sector deal from a government which has told us it is utterly against such a thing,” he said.
“The simple fact is that this deal will see Scottish taxpayers hand profits to a private sector group.
“The real beneficiaries of this deal are the investors in Australia and Canada who own the vast bulk of Anglian Water Business.”
Jackie Baillie, Scottish Labour public services spokeswoman said: “This decision has effectively privatised water management for our schools and hospitals.
“The SNP Government extended this decision beyond the general election because they knew it would be politically embarrassing to hand this contract to a private firm rather than the publicly-owned Scottish Water.”
Dave Watson, the head of bargaining and campaigns at Unison Scotland, said it was perverse to award a contract to a private firm to save money for the public sector if that firm was not paying corporation tax. He said the union was deeply disappointed that Anglian had won the contract.
“In fairness, the Scottish Government had few options because the system of retail water competition is the ultimate in market madness.
“Some £350m will be paid to Anglian Water in Huntingdon, only for most of that money to be repaid to Scottish Water in wholesale charges. The cost of this crazy system is picked up by the taxpayer.”
A spokesman for the union Unite said: “It’s deeply disappointing that once again a lucrative public sector contract has been award to the private sector.
“Each award to the private sector only serves to undermine the strong and popular case for public ownership models in industries like utilities and transport.”
The Anglian Water Business (AWB) contract will take over from Scottish Water subsidiary Business Stream at the start of next year and will provide a service to read meters, process bills and provide water efficiency and customer support. Scottish Water will still supply the water.
The contract was first due to be awarded in February, with Anglian Water made preferred bidder. A decision was delayed three times, leaving ministers vulnerable to legal action by Anglian.
Johanna Dow, the chief executive of Business Stream, said she was “very disappointed by the outcome”.
An Anglian Water Business spokeswoman said: “We are delighted the contract award is moving forward. The formal standstill period remains in force for another 10 days, but we look forward to the contract being awarded and being able to work with Scotland’s public sector, bringing similar savings to them as we have for our many other Scottish customers.”
Regarding issues about the company’s tax affairs, the spokeswoman added: “We are registered for tax in the UK and last year paid £174 million directly and indirectly in different taxes at the same time as investing more than £1billion and contributing a huge amount to the economy.
“We pay our tax in full, but the government and the UK’s tax regime allow us to defer some tax payments for a period to encourage us to invest in infrastructure and jobs.”
Patrick Harvie: Is Anglian Water really the sort of firm we want to be doing business with?
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