Water industry - ministerial objectives and principles of charging statement: partial BRIA

Section 4: Additional implementation considerations

Enforcement/ compliance

Compliance with the Ministerial Objectives and Principles of Charging will be the responsibility of Scottish Water and WICS. These requirements will come into effect from 1 April 2027 and will be monitored through existing governance and reporting arrangements rather than new enforcement mechanisms.

How compliance will be promoted and monitored:

• Delivery of the Ministerial Objectives will be tracked via the Water Industry Investment Group, Scottish Water’s Delivery Plan, and the annual performance reports published by WICS.
• Scottish Water will also work with WICS to make public-facing information available on its performance against outcome measures linked to the Ministerial Objectives, ensuring transparency. This is a requirement of the Ministerial Objectives.
• WICS will assess Scottish Water’s annual Scheme of Charges for consistency with the Principles of Charging.

Enforcement powers and responsibilities:

• Formal enforcement powers remain limited to those associated with drinking water quality and environmental standards, which sit with DWQR and SEPA, respectively. The Ministerial Objectives and Principles of Charging do not confer additional powers.
• WICS has been engaged throughout development via the Future Investment Group and Future Charging Group, and the proposals are not expected to create additional work beyond its current statutory duties. Scottish Ministers have a statutory duty to consult WICS on the Principles of Charging.

Resources and alignment:

• No significant additional resources are anticipated. Compliance activity will align with existing monitoring and reporting processes to minimise burden.
• The Scottish Government will consider whether existing directions such as Governance Directions issued to Scottish Water, require revision to ensure consistency with the Ministerial Objectives.

Consequences of non-compliance:

• Under section 56(5) of the Water Industry (Scotland) Act 2002, Scottish Water must comply with directions containing the Ministerial Objectives. Under section 29C(4) of that Act, Scottish Water and WICS must comply with the statement of policy regarding charges as issued by Ministers under section 29D. In addition to breaching a statutory obligation, failure to comply with the Ministerial Objectives may result in a failure to deliver the policy objectives and could additionally lead to reputational damage, delayed benefits for customers, or increased regulatory action.

Approach and exemptions:

• No exemptions are currently proposed, as Scottish Water and WICS have existing statutory obligations to comply with the Ministerial Objectives and Principles of Charging.
• Implementation will not be phased; all requirements commence from April 2027.

Compliance expectations:

• Scottish Water and WICS have statutory obligations to comply with the Ministerial Objectives and Principles of Charging.
• The desired outcome is demonstrable progress against all outcome measures linked to the Ministerial Objectives and annual Scheme of Charges that fully adhere to the Principles of Charging.

UK, EU and International Regulatory Alignment and Obligations

Internal Market/ Intra-UK Trade

The proposals are not expected to have any impact on intra-UK trade. Scottish Water operates within a geographically defined statutory area, and its core services are not traded across UK nations. As such, the Ministerial Objectives and Principles of Charging apply exclusively to Scottish Water and WICS and do not introduce any barriers or burdens that would affect trade between the nations of the UK.

Some of the Licenced Providers also operate in England and Wales, with customers based there. These proposals only have jurisdiction in Scotland. So whilst their services in Scotland will be affected by these proposals, their services elsewhere in the UK will not.

International Trade Implications

The proposals are not expected to have any implications for international trade. Scottish Water operates within a geographically defined statutory area, and its core services are not traded internationally. The Ministerial Objectives and Principles of Charging apply solely to Scottish Water and WICS and do not introduce any requirements that would affect imports or exports of goods or services, nor do they impose technical standards on imported goods or create differential treatment between domestic and foreign businesses.

EU Alignment consideration

The proposals do not create any barriers to alignment with EU standards. In fact, certain requirements within the Ministerial Objectives support progress in this direction. For example, the requirement for Scottish Water to adopt an integrated urban catchment management approach to sustainably drain rainwater is consistent with measures recently introduced in the EU through Article 5 of the recast Urban Wastewater Treatment Directive.

The proposals have no implications for access to EU markets for goods, services, or people, and there are no interactions with the United Kingdom Internal Market Act 2020 or relevant Common Framework agreements. Overall, the measures are considered neutral or positive in terms of EU alignment.

Legal Aid

The proposals have no implications for the availability of legal aid or expenditure from the legal aid fund. The Ministerial Objectives and Principles of Charging apply solely to Scottish Water and WICS and do not introduce measures that would result in additional individuals seeking legal assistance or being taken through the courts.

Digital impact

The proposals have no digital implications. The Ministerial Objectives and Principles of Charging apply solely to Scottish Water and WICS and do not introduce measures that differentiate between online and offline business models. The proposals cannot be circumvented through digital transactions and do not create any adverse impact on businesses operating in either digital or traditional contexts.

Business forms

The proposals will not introduce any new forms for Scottish Water or other businesses.

Section 5: Next steps and implementation

Recommendations/ preferred options

The preferred option is to evolve the Ministerial Objectives and Principles of Charging established for the 2021-27 regulatory period. This approach is consistent with the expectations set out in the Ministerial Commissioning Letter and reflects the preparatory work undertaken by WICS and Scottish Water. The focus has been on targeted refinements to improve clarity, ensure responsiveness to emerging challenges, and align with the current priorities of Ministers.

In terms of mitigation, Scottish Water’s draft business plan indicates that, in its view, customer charges will need to rise to deliver the Ministerial Objectives. Ministers have, therefore, been mindful of affordability when setting the Ministerial Objectives. The intention is that the Ministerial Objectives provide the framework for a balanced investment programme that enables Scottish Water to continue to provide high-quality services, accommodate growth, and adapt to the challenges presented by climate change, while keeping bills affordable for customers.

Implementation considerations/ plan

Following public consultation and publication of WICS’ draft determination, Ministers, having given consideration to these and the views of Scottish Water and the other statutory consultees, will finalise their Ministerial Objectives and Principles of Charging. The Ministerial Objectives will be issued in a Ministerial direction to Scottish Water and the Principles of Charging issued to Scottish Water and WICS as a policy statement. These documents must be in place before WICS issues its final determination in October 2026.

The Ministerial Objectives and Principles of Charging will come into force on 1 April 2027, from which point Scottish Water must comply with the Ministerial Objectives and Scottish Water and WICS must ensure the annual Scheme of Charges is consistent with the Principles of Charging. Enforcement will align with existing governance arrangements from this date. There are no WTO notification requirements, as the proposals do not introduce measures affecting international trade.

Post implementation review

The effectiveness of the Ministerial Objectives and Principles of Charging will be monitored through established governance arrangements. Delivery of the Ministerial Objectives will be tracked via the Water Industry Investment Group, Scottish Water’s Delivery Plan, and the annual performance report published by WICS. WICS will also assess Scottish Water’s annual Scheme of Charges for consistency with the Principles of Charging.

The 2027-33 regulatory period will run for six years, ending on 31 March 2033, at which point the Ministerial Objectives and Principles of Charging that are the subject of this partial BRIA will expire. Before this date Ministers will commission a review to inform arrangements for the subsequent period. This review will compare outcomes against expectations set out in policy documentation, including this BRIA, consider how the challenges the water industry currently faces have been addressed during the regulatory period, progress in delivering the Water Sector Vision, and identify any adjustments required based on evidence.