Water services - investing in and paying from 2027-2033: Fairer Scotland Duty impact assessment

Fairer Scotland Duty Summary

Ministerial Objectives and Principles of Charging for the Strategic Review of Charges 2027-2033

Summary of aims and expected outcomes of strategy, proposal, programme or policy

The Ministerial Objectives (MO) and Principles of Charging (PoC) represent Scottish Ministers’ policy with regards to Scottish Water over a regulatory period. These policies are inputs into the Strategic Review of Charges (SRC) process, providing the parameters for the industry.

Scottish Water develops a Business Plan according to the MO and PoC and the Water Industry Commission for Scotland (WICS) determines the resulting cost-effective maximum by which Scottish Water can increase charges over the period. This process is set out in the Water Industry (Scotland) Act 2002 in section 29 and sections 29A to 29G.

These MO and PoC for the upcoming regulatory period 2027-2033 are largely a continuation of existing policies in the current regulatory period, representing an evolution rather than a fundamental policy change. The MO represents the outcome Ministers expect from Scottish Water – which in turn affects the scale of investment needed over the period, and therefore the scale of income that Scottish Water needs. The PoC sets out Scottish Ministers’ policy on how Scottish Water should fund its functions over the regulatory period, including how to charge customers and what affordability support should be available.

Summary of evidence

The evidence used to develop and assess the fairness of both the MO and PoC has been gathered through extensive engagement with industry stakeholders and using various sources of evidence from stakeholders.

The Commissioning Letter issued by Ministers in April 2024^[1] requested that:

“……the Commission [WICS] ensures, together with water industry stakeholders, that consumers, communities and the environment are placed at the heart of this Review. They expect that the consumers are engaged throughout this process and that the Commission can demonstrate that Final Determination commands consumers’ support.”

To meet this, these parties entered into a Memorandum of Understanding to coordinate their work. Scottish Water undertook a range of customer surveys, both qualitative and quantitative, including both households and businesses. Consumer Scotland undertook extensive deliberative research, engaging with a cohort of stakeholders throughout the stages of the SRC process, which ensured their perspective fed into the process. Both showed widespread support for affordability support for households on low income but did not specifically conclude that there was any impact on the inequalities of outcome due to socio-economic deprivation.

The development of the MO and PoC, and the assessment of their consideration of the Fairer Scotland Duty, also draws on extensive engagement with industry stakeholders during the development of the MO and PoC through the Future Investment Group, the Future Charging Group, and the SRC Group.

The Scottish Government consulted on draft MO and POC over January – March 2026^[2] and alerted statutory consultees (including Licenced Providers) and key stakeholders (trade bodies, charity regulator, etc) to it.

Further stakeholder material considered when assessing the MO and PoC includes Consumer Scotland’s modelling of the affordability of water.^[3]

Summary of assessment findings

The MO and PoC set out what Ministers want the industry to deliver and how to charge for it, but they do not specify the investment needs or the charge levels. However, this assessment has considered the resulting service levels and charges when considering inequality of outcome for the socio-economically disadvantaged.

The findings of this Fairer Scotland Duty Assessment are the MO and PoC that do not introduce new inequalities of outcome for the socio-economically disadvantaged. Whilst these Ministerial policies may not diminish existing socio-economic disadvantage and inequalities of outcome, they do not target the socio-economically disadvantaged, setting harmonised charges across Scotland and standards of service. The affordability support available seeks to minimise the above inflation charge increases to avoid significant exacerbation of existing inequalities.

No changes are being made to the MO and PoC as a result of this assessment, as considerations of fairness were embedded throughout the process, such that it is inherent in the MO and PoC.

The Ministerial policies contained in the MO and PoC already seek to reduce the inequalities of outcome associated with being socio-economically disadvantaged, there is no variation in levels of service by customer type or area and affordability support and discounts are in place.