Scottish Parliament, 19 June 2003

502 contributions from 81 members. The official report.

Introduction

Water Industry

George Reid (None, Ochil)

Good morning. The first item of business is a debate on motion S2M-162, in the name of Murdo Fraser, on the water industry. There are two amendments to the motion.

Murdo Fraser (Conservative, Mid Scotland and Fife)

I will take a sip from my glass of private water and begin.

The Government-owned quango, Scottish Water, is rapidly becoming a national embarrassment. It is failing Scotland with higher domestic bills than in England; higher—and rapidly rising—bills for commercial premises than in England; and poorer quality water. It is time for the Scottish Executive to take action to address the concerns of water consumers throughout Scotland and to consider again the quango's management and structure.

I am sure that members will have had similar experiences to mine—being contacted by numerous constituents to complain about a rise in water charges in the current financial year. I have had a number of such letters, which tell of increases of between 200 per cent and 500 per cent. To quote just one example, Hackston's of Dunkeld, who are plumbers of Cathedral Street, Dunkeld, wrote to me on 12 May to complain about an increase in their charges from Scottish Water from £73.32 last year to £344.94 in the current year—an increase of almost 500 per cent. That charge is for an office with one toilet and a cold water tap.

It is not only small businesses that are affected; voluntary groups are affected too. The secretary of Grandtully bowling club in Perthshire wrote to me on 11 May to complain about an increase in fixed charges from £13 in 2002-03 to £130 in 2003-04—a rise of 900 per cent. That is for a small bowling club with fewer than 30 members who use water only for the toilets and the occasional cup of tea.

Business organisations such as the Federation of Small Businesses, the Confederation of British Industry Scotland and the Forum of Private Business tell me that they have been deluged with complaints about the increases from members. In some cases, the increases threaten the future viability of those small businesses. My colleague Phil Gallie tells me about Andersons Hardware and Hire in Dalmellington, Ayrshire, which has experienced an increase of more than 400 per cent in water charges since last year. When the proprietor phoned Scottish Water to complain that the increase threatened the viability of his business, he was told that it was up to him to run his business better. The words pot, kettle and black come to mind.

Fergus Ewing (Scottish National Party, Inverness East, Nairn and Lochaber)

If water quangos are so bad, why did the Tories set them up?

Murdo Fraser (Conservative, Mid Scotland and Fife)

Hindsight is a wonderful thing. We have considered the performance of the water quangos—the three boards and Scottish Water—and clearly they do not work. As Mr Fergus Ewing is aware, if one draws a comparison between Scottish Water's performance and the performance of the private water companies south of the border, it is clear which model is delivering for its customers.

The Federation of Small Businesses believes that the decisions that were taken and the rules that were made by the water commissioner and, in particular, the switches to increased fixed charges for water supply are at the root of the problem. Today we ask the Scottish Executive to consider urgently the charging structure for Scottish Water.

It is not only the increases against last year's charges that constitute the problem. Scottish businesses already pay substantially higher bills than equivalent businesses south of the border. BP's Grangemouth refinery will pay Scottish Water £12.7 million in the current year. South of the border, the equivalent bill would be in the region of £7 million. BP is considering taking Scottish Water to court to try to force a reduction.

There are some more dramatic examples. In some cases, commercial premises in Scotland pay 16 times what their equivalents pay south of the border. Water charges are placing Scottish businesses at a competitive disadvantage. It is little wonder that Digby Jones, director general of the CBI, said in Edinburgh last Friday that it was seriously likely that companies would pull out of Scotland because of soaring water bills. He said that CBI members were deeply concerned about the increased cost of water compared with charges in England and that the charges contributed to the competitive disadvantage of Scottish companies.

Bruce Crawford (Scottish National Party, Mid Scotland and Fife)

I note from Mr Fraser's motion that the Tories are reticent about saying that they want to privatise water. Given the position that the Tories are developing on privatisation, why do they not just spit it out? They are pushing at an open door, anyway.

Murdo Fraser (Conservative, Mid Scotland and Fife)

I am obliged to Mr Crawford for that helpful intervention and I will develop that point if he will bear with me for a moment.

All those examples of increased charges seem to be at odds with the Executive's declaration that growing the Scottish economy is its first priority. Scottish businesses already face higher business rates than those south of the border; now they have the added burden of higher water rates. That double whammy makes Scottish business uncompetitive and makes Scotland a less attractive place in which to do business than the rest of the United Kingdom.

I appreciate that Scottish Water requires investment in infrastructure, but I wonder whether I am too cynical to suggest that the increases are directed at those in the small business sector because they are in the weakest position to protest. If the increases were applied to the domestic sector, I imagine that every MSP in the chamber would be drowned under the weight of complaints from constituents and the matter would be right at the top of the Executive's agenda for action. However, the small business sector is regarded as a soft target for Scottish Water and that is simply disgraceful.

Domestic customers, however, do not escape. Scottish household bills have increased by 94 per cent in real terms during the past decade, whereas English domestic bills have risen by only 22 per cent since 1989. The average measured household bill in England and Wales is £209 for 2003-04 compared with £245 in Scotland—that is 20 per cent higher—yet Scottish Water delivers lower water quality, more pollution from leaking sewers and more wasted water as a result of leaking pipes. The water commissioner has concluded that, as a result of Scottish Water's inefficiencies, the average household pays about £86 a year more than should have been necessary had Scottish Water been as efficient as its English counterparts.

Des McNulty (Labour, Clydebank and Milngavie)

Between 1988-89 and 1998, the following price rises occurred in England: South West Water, 142 per cent; Northumbrian Water, 112 per cent; North West Water, 111 per cent; Severn Trent Water, 108 per cent; Southern Water, 107 per cent—I could go on. The average increase was 102 per cent and, in real terms, 46 per cent above inflation. That is the legacy of Conservative privatisation. In the same period, profits in Northumbrian Water rose—

Alex Johnstone (Conservative, North East Scotland)

Will Mr McNulty take an intervention?

Murdo Fraser (Conservative, Mid Scotland and Fife)

Mr McNulty will have the opportunity to make a speech in due course. Is he disagreeing with the water commissioner, who says that Scottish householders are paying £86 a year too much because of the inefficiencies of Scottish Water? Let us remember Mr McNulty's role in the famous referendum. Perhaps he needs to reflect on that in the light of experience.

We are aware of the problems of Scottish Water. The question is, water we going to do about it?

Murdo Fraser (Conservative, Mid Scotland and Fife)

First, the Scottish Executive must take urgent action to reduce the burden on Scottish businesses. That might involve examining the water commissioner's approach to fixed charges for small businesses and considering increased use of water meters.

The question of Scottish Water's inefficiency also requires to be addressed. As I pointed out, Scottish customers are paying through the nose for the inefficiencies of the Scottish water industry. I appreciate that there has been a reorganisation of Scottish Water, but that does not excuse its poor performance compared with its counterpart south of the border. It is difficult to regard the Scottish water industry without reaching the conclusion that the difference between the more efficient and cheaper water companies in England and Scottish Water is that the English companies are in the private sector. If the Scottish water industry had been privatised at the same time as the English water companies, we would today have a more efficient industry, better quality water and lower bills for more domestic and business customers. Only by moving Scottish Water into the private sector, whether as a privatised company or, preferably, as a mutual company, will we provide a proper solution.

George Lyon (Liberal Democrat, Argyll and Bute)

Will the member take an intervention?

Murdo Fraser (Conservative, Mid Scotland and Fife)

Not at the moment. I want to respond to Mr Crawford's point.

I should make it clear that my party has no ideological problem with the notion of privatisation. I do not want anyone this morning to accuse us of being wets. However, the information that we have received from industry analysts is that investors would not find Scottish Water attractive if it were sold off. Moreover, Welsh Water prospers as a mutual company and Yorkshire Water is considering a move from its fully private status to becoming a mutual company. As a result, it seems that mutualisation offers a better model.

Bruce Crawford (Scottish National Party, Mid Scotland and Fife)

Which mutualisation model would the member follow? Would he follow the model of Welsh Water, which is a shareholding, or that of the Glasgow Housing Association, which is a not-for-profit trust?

Murdo Fraser (Conservative, Mid Scotland and Fife)

If Mr Crawford had read our motion, he would have found that we call on the Scottish Executive to investigate the different models of mutualisation to see which would be the most suitable. It is clear that mutualisation works.

I read with some interest the SNP amendment, which

"calls on the Scottish Executive to consider a not-for-profit trust".

What exactly is the difference between a not-for-profit trust and a company limited by guarantee that returns any profits to its members? I am not sure that I see any difference at all. Indeed, I wonder whether the SNP is so ideologically opposed to the private sector that it cannot swallow the thought of using the words "private company" and instead dreams up the phrase "not-for-profit trust".

George Lyon (Liberal Democrat, Argyll and Bute)

I acknowledge the member's point that we have to make major changes to Scottish Water's structure. However, how on earth will that solve the immediate problem of the introduction of standard charges? Restructuring will have no impact whatever and is no solution to the problem that our small businesses and the voluntary sector face. Either Murdo Fraser suggests allocating some money to tackle that problem or he remains silent.

Murdo Fraser (Conservative, Mid Scotland and Fife)

Mr Lyon has not been listening to me. I have outlined why Scottish Water's charging structure needs to be examined. However, in the longer term, the organisation's fundamental structure must be addressed or we will continue to see the price rises that I have highlighted.

Allan Wilson (Labour, Cunninghame North)

Will the member give way?

Murdo Fraser (Conservative, Mid Scotland and Fife)

I am in my last minute.

George Reid (None, Ochil)

I think that, in view of the large number of interventions, I will give you about 14 minutes, Mr Fraser.

Murdo Fraser (Conservative, Mid Scotland and Fife)

I am grateful.

Allan Wilson (Labour, Cunninghame North)

As far as the longer term is concerned, how would turning Scottish Water into a mutual company reduce charges? By necessity, the company would have to borrow on the markets and would therefore be charged a higher rate of interest on its current level of borrowing.

Murdo Fraser (Conservative, Mid Scotland and Fife)

I point the minister to the example of the privatised companies in England. They were able to deliver better quality service, better water quality and lower charges for a period of 10 years and more because they were in the private sector. We should follow such a model.

It is true to say that Scottish Water is burdened with a £2.1 billion debt. When the English water companies were privatised, their debts were written off, although much of that money was recovered from the sale proceeds. However, it is wrong to think that Scottish water companies have been penalised unfairly. As Peter Jones pointed out in The Scotsman on Friday, the net cost to the taxpayer of writing off the debts for the English water companies was around £50 per customer whereas in Scotland the figure would be about £300 per customer. There can be no argument that it is justifiable at this stage to write off more debt, at least not until such time as Scottish Water can show itself to be an efficient industry that strives to make cost savings.

A mutual company would be owned by its customers and employees and would be answerable to them. Being part of the private sector and operating in a competitive environment would give it an incentive to drive down costs. Furthermore, a mutual company would be free from political interference. I should point out that, far from the Tories having a monopoly on such an idea, the Scottish co-operative movement has also expressed an interest in the mutual model. As a result, it should command support from across the chamber.

When I saw the Executive's amendment, I thought that it was having a laugh. The amendment says that Scottish Water

"has started the process of delivering cost effective and improved services".

Where are they? That statement will come as a great surprise to the many small businesses that I mentioned earlier. The Executive amendment reeks of complacency. The fact is that the Executive appoints the regulator, owns Scottish Water, as it owned the three previous water authorities, and appoints the management. Ultimately, the buck stops with the Executive, which means that it must sort the matter out. However, there is no sign today that the Executive is taking the business community's real concerns seriously.

Mutualisation offers a model for the future of Scottish Water that will deliver a better quality service at lower cost to Scottish householders and—equally important—Scottish business. It is time for the Scottish Executive to take the necessary action to prevent Scottish Water from continuing to be a burden on economic growth in Scotland and an embarrassment to the nation.

I have pleasure in moving, That the Parliament notes with concern the dramatic increases in charges by Scottish Water to businesses in 2003-04 which, in some cases, amount to nearly 500% more than the amount charged in 2002-03; believes that these increased charges bear no relation to the service provided by Scottish Water to these customers; is concerned that these rising costs have increased the competitive disadvantage faced by Scottish firms, particularly in relation to England; further notes that household bills have gone up by 94% in real terms over the past decade, while English domestic bills have only risen by 22% since 1989; acknowledges that privatisation in England has brought substantial capital investment which has led to lower bills for businesses and households alongside improved water quality; calls on the Scottish Executive to address urgently the concerns of domestic and business customers in relation to these higher charges and to look at widening competition with a view to reducing costs, and further believes that, as public ownership has failed customers in Scotland, the Executive should investigate models of private ownership.

Allan Wilson (Labour, Cunninghame North)

I add my concern to that which was expressed by Murdo Fraser over those who face increased water bills this year. No one, least of all me, wants costs to rise. However, at this point, I caution against Mr Fraser's proposal that changing the whole system would necessarily benefit customers or consumers.

I will remind members why Parliament decided in the previous session that public ownership of the water industry in Scotland represented the best deal for customers and explain why the changes to charges have been made. Scottish Water has started down the path towards more efficient services, which will keep down future charges for consumers. I say to Bruce Crawford that any change in ownership now would simply detract from that progress and would be worse for customers.

Our programme for a better Scotland makes clear the Liberal Democrat and Labour commitment to retain Scottish Water in public ownership. We must remember that Scottish Water was created only just over a year ago at the Parliament's behest. We knew then about all the problems in the water industry and we knew that there was need for further investment. We knew that we needed to protect public health and to improve water quality and customer services. Moreover, we knew then—as we know now—about the need to deliver those services efficiently. However, we knew that all those things could not be done overnight and therefore we decided, correctly, that the best deal for the Scottish people was to merge the three water authorities into one national public sector organisation. That was true then and remains true now.

As Mr McNulty has pointed out, the claim that prices in Scotland have risen at four times the rate of those in England is wrong. It does not compare like with like. A decade ago, there were no sewerage charges in Scotland as they formed part of the general local authority charges. As a result, the Tories are comparing payments for both water and sewerage with payments for water alone.

Murdo Fraser (Conservative, Mid Scotland and Fife)

Will the minister confirm that Scottish domestic customers are paying on average 20 per cent per annum more than domestic customers in England and Wales?

Allan Wilson (Labour, Cunninghame North)

I confirm that, as far as comparisons with England are concerned, it might be true that we are tackling problems a bit later than they were tackled in England; however, we are certainly tackling them vigorously now. I think that that is probably what Mr Fraser is complaining about. We set up Scottish Water as a regulated public sector corporation to tackle those problems and we intend to see the job through.

It is early days to be judging the performance of Scottish Water. After all, its first report has not even been laid before Parliament yet. However, I believe that Scottish Water has already made a good start in its first year. Operating costs have been significantly reduced; customer services have been improved; and the quality of both drinking water and the wider water environment is better. Indeed, I can testify to that from the example of Saltcoats in my constituency. All that has happened at the same time as we have had to merge the three former water authorities into one.

There is still a long way to go. Although much has been done, there is much more still to do.

Alasdair Morgan (Scottish National Party, South of Scotland)

I am sorry to interrupt the minister's self-congratulation. However, will he address one of the major points of this debate, which is the disproportionate impact of the new charging scales on small businesses? That situation has come about mostly because of standing charges, which in some cases have led to bills tripling or quadrupling.

Allan Wilson (Labour, Cunninghame North)

I will address precisely that point.

As we all know, the water infrastructure that Scottish Water inherited was not in great condition and, rightly, there is considerable pressure to bring it up to higher standards, which requires the massive investment programme that we have embarked upon. During the four years from 2002 to 2006, we will invest £1.8 billion in the industry, which, per capita, is more than will be invested in England and Wales.

That investment will improve drinking water quality and enhance bathing water and the natural water environment, but it has to be paid for. It is being paid for partly by the current charging regime, to which Alasdair Morgan referred, and partly by increased Government borrowing. Claims that Scottish Water is required to eliminate its borrowing by 2006 are wrong. The Executive is providing huge financial support for the investment programme—we will lend a further £250 million this year and almost as much for the next two years.

Richard Lochhead (Scottish National Party, North East Scotland)

rose—

Allan Wilson (Labour, Cunninghame North)

Let me develop my point, because it relates directly to the issue that Alasdair Morgan raised.

No one—least of all me—wants costs to increase, which is why Scottish Water has been tasked with making significant efficiency savings, the fruits of which will be seen in future, as they will lead to lower charges in the longer term. However, we also want the charges that people pay now to be fair and equitable, which I think was the point that the honourable gentleman Alasdair Morgan made. That desire underlies the charges scheme that has been agreed by Scottish Water and the water industry commissioner for Scotland this year. The level of charges is based on two principles: charges should be harmonised throughout Scotland and they should reflect the cost of the provision of the service. People and businesses throughout Scotland should pay the same for an equivalent service and the amount that is paid should reflect the average cost of providing that service. The water industry has largely fixed costs, which is reflected in the charge increases.

Of course, members pick on the extreme examples of charge rises—I have had 50 or so representations from members, including Alasdair Morgan, on that subject—but, naturally, we do not hear from the 20,000 or so business customers whose bills are lower than they were last year, or from the many thousands more who had low percentage increases. Nor do members point out the critical fact that those who face the 500 per cent increase to which Murdo Fraser referred had bills of less than £60 last year, which is on average less than the band A householder would pay. I sympathise with those who face much larger bills this year, but we must remember that those customers have in the past paid less than the full cost of the service they have received, which means that other customers have had to pay more. That is not fair and cannot be right.

A review of ownership would create only uncertainty and would undermine the progress that Scottish Water is making, which cannot be in the public interest. We do not need more analysis; we need to allow Scottish Water to deliver on its programme of efficiencies and capital investment. It should not be deflected from that course, which is why I commend to the Parliament the Executive amendment to Murdo Fraser's motion.

I move amendment S2M-162.3, to leave out from first "notes" to end and insert:

"believes that, having established Scottish Water in 2002, this is the right means of delivering cost-effective and improved services in accordance with the requirements of the Parliament and that, in the short time since Scottish Water's establishment, it has started the process of delivering cost effective and improved services, and further believes that a review of its ownership and funding now would undermine that progress to the detriment of all customers."

Roseanna Cunningham (Scottish National Party, Perth)

I expected to begin my remarks with the comment that surely we all agree that the present situation cannot be allowed to continue without serious adjustment or intervention, but that was before I read the Executive amendment. Is the minister saying, despite his crocodile tears, that he is perfectly content that the present situation is not only tenable, but desirable, which is the clear implication of the Executive amendment? To be frank, the staggering complacency of that attitude beggars belief.

The impact of the charges on Scottish businesses is absolutely dire and it is felt no matter how big or small the business is. The figures make depressing reading and show the effect on every high street, industrial estate and large manufacturing enterprise in every part of Scotland. We have heard reference to some of the price hikes that business must endure. Small businesses that use hardly any water are faced with 100 per cent rises—for example, Mr Barnes's Interproducts in my constituency has been faced with such rises from one year to the next—and bigger businesses are equally hard hit by price rises. Of course, there are also the invidious comparisons with water rates south of the border. Does the Executive just not care? That is the implication of what the minister said.

Comparisons with other water rates illustrate starkly the competitive disadvantage of Scottish businesses when compared with similar businesses south of the border. The disadvantage seems to be most marked in the commercial and retail sectors, but businesses such as newsagents and restaurants also pay far more.

Interestingly, the figures show that the one sector in which the Scottish average charge is lower than that in England and Wales is the brewery sector. That leads one to the conclusion that one thing that Scottish Water can do well is to organise the proverbial in a brewery. The difficulty is that people draw the conclusion that that might be the only thing that Scottish Water can do well.

That perception might be a little unfair, because even the critics accept that the problem is not only for Scottish Water to resolve. Bill Anderson of the Forum of Private Business recognised the need for Scottish Executive transparency when he said:

"Everybody is blaming everybody else. The debt charges around Scottish Water's neck is a huge issue but if they had come to consumers and said we're going to have to increase water charges to pay for urgent work on the infrastructure, we might have understood. But to impose unfair extra burdens on those most unlikely to be able to pay by stealth shows a total disregard for open government."

I do not want to absolve Scottish Water of all responsibility for the current situation. The truth is that we cannot continue with the existing levels of customer dissatisfaction, from both domestic and non-domestic customers, for much longer. Businesses do not know where to turn for redress, which leads them to compare their water usage with domestic usage. The business in my constituency that I mentioned is an example of that—its charges have increased from £223.59 to £451.93, but if the owner's small office were a flat, it would be in the lowest council tax band and he would pay around £210 per annum. He pays way more than twice that.

It is understandable that businesses should react by comparing their charges with domestic charges, but the reaction ignores the likelihood of future price rises in the domestic sector, to which I will refer shortly. However, whether customers are domestic or business, the situation highlights the lack of a clear customer champion in the present set-up. Two years down the line, we are beginning to see the drawbacks of having a water quality regulator who is responsible for quality and enforcement but whose hands are tied because financial decisions are taken by the water industry commissioner. Perhaps the time has come to consider the amalgamation of those two posts with a beefed-up role that includes customer advocacy. That post would provide a better process for Scottish Water and for customers.

I mentioned the potential for rises in domestic charges. My concern arises out of the Scottish Executive's published spending figures for the next few years. I listened to the minister's detailed defence of the Executive's spending plans. In 2002-03, spending was planned at £285 million; in the present year, it is to be £256 million; but for 2005-06, it is to fall to £207 million. Those plans beg the question how Scottish Water will make up the difference. Things are bad now, but it looks like they will only get worse. Will the minister guarantee that the difference will not be made up by a further increase in domestic water rates, which, at the moment, definitely appears to be on the cards?

The Executive cannot just sit and do nothing in the face of that issue. We urgently require a full and detailed review of the financial arrangements for Scottish Water with the remit of affording Scottish Water greater financial flexibility.

Allan Wilson (Labour, Cunninghame North)

I understand that greater financial flexibility means borrowing more in the financial markets, at interest rates that are necessarily higher than those available from the Executive. How would that benefit Scottish Water or its customers?

Trish Godman (Labour, West Renfrewshire)

I call Roseanna Cunningham to reply, but inform her that she is in her final minute.

Roseanna Cunningham (Scottish National Party, Perth)

I am in my last minute and I have two more paragraphs of my speech, during which I will deal in part with the minister's point—my colleagues will also deal with it.

Through legislation in the coming year, the Executive will allow local authorities to decide for themselves on an affordable and prudent level of borrowing for their financial circumstances. Surely that same flexibility could be granted to Scottish Water, so that it could make its own decisions. Is that even under consideration? If such a move is being considered for local authorities, are we going to consider it for Scottish Water? Scottish Water needs to be released from the constraints of Executive diktat, and the Executive itself is constrained by Treasury rules.

I hope that the future funding of Scottish Water comes about not through privatisation, which is what I suspect the Tories—and perhaps Labour too—really want, but through a not-for-profit trust: a Scottish public services trust. Such a trust could serve as a means of levering in the investment that we all believe to be necessary. That does not mean a change in ownership, but a change in the way in which investment is levered into the sector. Ultimately, the solution to the high charges that are being faced by business is a sensible way forward for Scottish Water that involves precisely that.

I move amendment S2M-162.4, to leave out from "acknowledges" to end and insert:

"believes that the offices of the Water Industry Commissioner for Scotland and the Water Quality Regulator should be amalgamated to create a tough new champion on behalf of customers; further believes that a full and detailed review of the financial control arrangements for Scottish Water requires to be undertaken as a matter of urgency with a view to affording Scottish Water greater financial flexibility, and calls on the Scottish Executive to consider a not-for-profit trust to provide an appropriate vehicle for investment which would allow Scottish Water to be free of artificial constraints and keep charges under control."

Nora Radcliffe (Liberal Democrat, Gordon)

One truism often heard is that we get what we pay for. Paying for what we get would seem equally reasonable. What are the customers of Scottish Water paying for? The Victorians built a superb system of piped water, serving homes and premises and providing sewers to take away waste. That probably did more to improve public health at a stroke than all the efforts of the national health service since it was created put together.

In recent times, that system and its water pipes and sewers were the responsibility of local authorities. Then it was handed over to three water companies, which were subsequently rationalised into one publicly owned body, Scottish Water. For whatever reason—over the years, there were reasons that could, at the time, have been viewed as good and sufficient ones—the stewardship of that magnificent asset left by the Victorians was lousy. We are left with the consequences of decades of underinvestment in the maintenance and development of the infrastructure. Scottish Water inherited a system that required a major overhaul and upgrading. It also inherited the data, staff and structures of three water companies that, in turn, had inherited the data, staff and structures of 30-odd local authorities. Furthermore, those handovers took place over a relatively short period.

Scottish Water has had to rationalise what it inherited: widely differing charges in different parts of Scotland; a huge and complex set of assets, some of which were in fact liabilities; not very good data about what assets it had, where they were and what condition they were in; and a requirement to meet ever more stringent quality standards. So much for how we got here and for a starting point for achieving safe, efficient, sustainable and equitable water services for the whole of Scotland.

The Conservative motion highlights dramatic increases in charges to businesses. Without trying to downplay those increases or the impact of the standing charge on small businesses and low-volume users in particular, I notice that one of the most dramatic percentage increases—626 per cent has been cited as an example—was an increase from £19 per annum to £138 per annum. The percentage increase makes the cash amount sound rather dramatic.

That pinch of salt having been taken, there is no doubt that the decision to apply a standing charge has had a big impact. The reason for the standard charge must be considered. About four fifths of the costs of supplying water services relate to the fixed assets—the pipework. I understand the fairness argument, which is that everyone should bear an equitable share of those costs, which have to be met regardless of the amount of water used or the amount of waste generated.

The other big impact on this year's water bills has been the effect of harmonising charges across Scotland. I see that harmonisation as only fair. There have been big losers, and no doubt there have been big winners, although we do not hear from them. The water users who are currently losers and who are now picking up their fair share of the costs of providing water services must previously have been getting an unfair bargain at the expense of those who were paying more than their fair share.

Murdo Fraser (Conservative, Mid Scotland and Fife)

Does Nora Radcliffe appreciate the fact that this year's increases are only part of the problem? The other major issue is the fact that Scottish businesses are paying much more than their counterparts south of the border—sometimes 16 times more for an office of similar size. Will she comment on what the Liberal Democrats believe to be the reason for that?

Nora Radcliffe (Liberal Democrat, Gordon)

If I may, I will leave that point until later in my speech, when I intend to deal with it.

It should be remembered that that harmonisation hit is a one-off, in that any future increases will be roughly the same for everyone. The differential impact across Scotland arises partly because some of us—in the old North of Scotland Water Authority area—took a whack earlier.

Much has been made of comparisons between the situation with Scottish Water and the situation in England and Wales. Some of those comparisons have been very selective. There are wide differences between different areas of England. In addition, modernisation began a lot earlier in England, so direct comparison is not always meaningful.

Furthermore, privatisation was not universally beneficial, as some proponents would have us believe. Indeed, Sir Patrick Brown, the civil servant in charge of privatisation, has since said that customers lost out with privatisation. Phrases such as "mass profiteering" have been used, and we should not forget the high level of disconnections in some areas and the outbreak of dysentery in such areas.

The Scottish public made it perfectly clear that they did not want privatisation. Mutualisation might be a good option, but there is no single right answer. Scottish Water was set up last year after widespread consultation and much discussion in the Parliament during the passage of the bill that set it up. It does not seem sensible to mess about with a body that is barely a year old.

Scottish Water has a lot to do. It could perhaps have done what it did better. We cannot, however, get away from the facts that the infrastructure must be upgraded, that harmonisation has to be achieved and that Scottish Water needs to become more efficient. The quickest route to achieving efficiency seems to be to allow Scottish Water to get on with the job that it has to do. Messing about with what was set up so very recently would be daft. I return to where I started: we get what we pay for and we have to pay for what we get.

Trish Godman (Labour, West Renfrewshire)

Many members wish to speak during the debate. I intend to try allowing six minutes for back benchers. If the position changes, I will let members know, and we will move to five-minute speeches.

Alex Johnstone (Conservative, North East Scotland)

In opening the debate, Murdo Fraser demonstrated at some length the extent to which the water industry has become an expensive burden on the Scottish economy. Such an extraordinary burden might in some way have been justified if it was possible to argue that the quality of service that the industry provides or its guardianship of the environment had in some way been improved as a result of the higher charges. Unfortunately, however, the reverse appears to be the case.

Scottish Water's performance has become something of a joke in certain circles. The percentage of drinking water tests passed in 2001 has fallen below the level—

Sarah Boyack (Labour, Edinburgh Central)

Will the member acknowledge the numerous projects around the country that have already been completed to improve the basic infrastructure of the water industry? When he says, in a cavalier fashion, that there has been no improvement in the quality of services, is he totally ignoring the impact of that investment?

Alex Johnstone (Conservative, North East Scotland)

No, I am not ignoring the impact of that investment. I hope to go on to discuss the fact that that investment is not producing the results that similar investment in the south has produced, both for public service and for economic water provision.

Nora Radcliffe (Liberal Democrat, Gordon)

Does Alex Johnstone accept that the investment that has been made south of the border has had about 10 years longer in which to have an effect?

Alex Johnstone (Conservative, North East Scotland)

What we are discussing today is the fact that the model south of the border has been more successful. Nora Radcliffe has just demonstrated that on my behalf.

We are trying to demonstrate that the Scottish economy is being threatened, and my point is that investment is not achieving the results that were intended, even if we disregard the level of cost.

Leakage is a particular embarrassment, with a massive 23.7 cubic metres per kilometre lost each day. That compares with 9.8 cubic metres of loss per kilometre south of the border. The water industry commissioner for Scotland, Alan Sutherland, pointed out that Scottish water and sewerage bills in 2001-02 were 60 per cent higher than they would have been under the three former water authorities, had they operated as efficiently as their English and Welsh counterparts. Consequently, we continue to suffer the economic disadvantage.

According to its amendment, the Scottish Executive's position appears to be that all in the garden is rosy. While we try to open the eyes of our opponents to the alternative structures that have delivered more successfully in our neighbouring country, the Executive's position seems further entrenched, yet with an increased determination to keep the water industry in the straitjacket that it has placed it in.

The Scottish Executive has told us that the draft bill that is to be introduced later this year will establish that Scottish Water alone is able to draw drinking water from and add waste water to public sewerage and water networks and will prohibit common carriage. It will prohibit anyone other than Scottish Water from providing domestic customers with retail water and sewerage services and will establish a licensing regime to control organisations that provide retail water and sewerage services to non-domestic customers. Consequently, the opportunities for competition that were brought about as a result of the Competition Act 1998 will be denied to Scottish industry and therefore further efficiencies will be denied to the Scottish economy.

The Scottish National Party's position seems equally naive, although certain questions have been raised if the comments that have been made so far are anything to go by. The SNP's 2003 election manifesto guaranteed that water will remain under public control and suggested a not-for-profit trust to deliver infrastructure investment and keep charges under control. However, questions asked this morning—they have not been successfully answered so far, in my view—would appear to indicate that the model of a not-for-profit trust that the SNP wishes to discuss is not that dissimilar to alternatives that we have proposed, such as mutualisation.

Allan Wilson (Labour, Cunninghame North)

The member refers to mutualisation and not-for-profit trusts as being one and the same thing. How could either model borrow more for less in the financial markets than the Scottish Executive can?

Alex Johnstone (Conservative, North East Scotland)

I did not say that they were the same thing—I said that they were not dissimilar.

What we are trying to point out is that efficiencies in the running of the industry may conceivably—in our view definitely—produce efficiencies within the structure of the industry that would far outweigh any additional cost of borrowing, which in my view remains marginal.

Richard Lochhead (Scottish National Party, North East Scotland)

Will the member take an intervention?

Alex Johnstone (Conservative, North East Scotland)

No, I am into my last minute and I will have to get on.

By any standard, Scotland and its water consumers have had a raw deal from the reorganisation of the water industry. In comparison with water providers south of the border, Scottish Water is second rate in almost every respect. Not only is our water more expensive, both for the domestic consumer and for businesses, but the quality of service is below the standards of the industry's main UK comparators. Why are we in that position? Why did we not go down the same road as the English water companies, which have delivered cheap, clean water and better sewage disposal? The answer is that in Scotland, those were not our priorities. In Scotland, the number 1 priority for the people I am looking at in the chamber was to deliver a politically acceptable, state-owned water provider. If the Des McNultys of this world hoped that that would provide an example of the benefits of a state-controlled monopoly, their naivete has exposed them, for which the Conservatives are grateful. I support the Conservative motion.

Des McNulty (Labour, Clydebank and Milngavie)

I greatly enjoyed the performance of "Alice in Wonderland" put on by pupils at St Joseph's Primary School in my constituency, but none of the surreal aspects of their performance can be paralleled by the presentation from our Conservative counterparts.

The reality is that water prices in England and Wales are coming down because of the imposition by a Labour Government south of the border of tight regulation, which has cut back the super-profits that were made by privatised water companies under the previous Conservative Government. The reason that water prices have gone up so much in Scotland, compared to 1988-89, is because of the very low levels of investment that were permitted by the Conservatives. The Conservatives are not alone: if we go back 30 years, we can see that there has been consistent underinvestment in the water and sewerage industry in Scotland. However, the 18 years of Conservative domination was the worst and most pathetic period for infrastructure management in Scotland. Not only did the Conservatives refuse to take the problem of water investment seriously, they diverted attention from charging with the ridiculous procedure of the poll tax. We spent the early 1990s talking about the poll tax, whereas in England the Conservatives began to address water investment through privatisation, even if that was a flawed solution.

The solution we were given in 1994-95, to which we in Strathclyde systematically objected, was that proposed by the Conservatives. The Conservatives ignored what the people of Strathclyde wanted—and, I would argue, what the people of Scotland wanted—which led to their ending up with no Scottish MPs in 1997. Unfortunately, the Conservatives' solution persisted until last year. The underperformance of the three water quangos was a consequence of the nature of the reorganisation that the Conservatives put in place. They are responsible for the period between 1979 and 1997 and it has taken time to unravel the consequences.

Significant investment is now being made, which is leading to increases in water charges. Had that investment been balanced out over 12, 15 or 20 years, as it should have been, those increases would have been much smaller. The real, long-term responsibility rests with the Conservatives. If Murdo Fraser wants to be honest with the CBI and the small businesses that write to him, he should say, "Mea culpa. I'm sorry, we didn't put the money in in the 1980s and 1990s and we ended up with all those flawed and silly solutions." The way in which the Labour Government south of the border has sought to control—

Alex Johnstone (Conservative, North East Scotland)

Why does it not do so here?

Des McNulty (Labour, Clydebank and Milngavie)

I believe that it is doing so.

The water industry commissioner has reduced from £2.3 billion to £1.8 billion the amount that we will have to pay for new investment. That is not enough, and I will come to the legitimate criticisms that can be made of Scottish Water. However, the Conservatives' stance on the issue is fundamentally dishonest.

There are flaws in Scottish Water's charging regime, although I pick up from business not only issues about the charging regime, but fundamental issues about the constraints imposed by the lack of investment and Scottish Water's lack of capacity for investment in new developments. Growth opportunities in Scotland are being held back because Scottish Water cannot get the pipes into areas where investment is needed.

In my constituency, there is the case of a much-needed old people's home that people have wanted to build for more than 10 years. However, Scottish Water cannot find the resources for the central option, which is the one that would meet the legal standards and make some improvement to the asset, although it would invest only enough to prevent further deterioration. That is the framework within which, politically, Scottish Water operates. There should be some flexibility, because we need a framework in which there is an opportunity for utilities to co-ordinate their work with developers, local authorities and others. We need to find a mechanism that allows development to take place and prevents Scottish Water from holding development back.

I am concerned that whenever I ask a question of Ross Finnie, the Minister for Environment and Rural Development, I get the answer, "This is an operational matter for Scottish Water." A couple of weeks ago, Bruce Crawford asked Mr Finnie when he next intended to meet Scottish Water. The response was:

"I have nothing in my diary"—[Official Report, Written Answers, 29 May 2003; p11.]

There are major issues attached to Scottish Water. I speak not only of the charging regime and the way in which that impacts on small businesses, or of the development issue that I highlighted, or of specific issues with developments such as the one in Mugdock in my constituency. Ministers must take more responsibility for such matters than they have until now. There is one doctrine that we must strongly attach ourselves to, which is that ministers have a responsibility for organisations such as Scottish Water that work at arm's length—not a day-to-day, operational responsibility but a responsibility for ensuring that they pick up the consequences of such organisations' policies and the frameworks that they set. I do not think that is happening at present. I hope that Mr Finnie takes account of the points that I have tried to make, mends his ways and responds more positively in future when members raise issues of concern.

Fergus Ewing (Scottish National Party, Inverness East, Nairn and Lochaber)

Carrbridge is an attractive village in my constituency that relies substantially on tourism for its survival. There is also a garage there. I am sure that if members visit the village during the holidays they can buy some petrol from Dougie MacDonald at the garage.

However, during the Easter weekend all the residents and businesses in Carrbridge had no water for five days because of a faulty valve in a pipe. I mention that serious problem because the real cause of it goes back two years to attempts that were made to get permission to lay the new water pipeline that is needed to replace the faulty existing pipeline from Loch Einich, which is in the northern part of the Cairngorms. It has taken two years for us to have the various quangos involved agree that the new pipeline may be laid below ground. It has taken so long because the pipeline would cross sites of special scientific interest.

It has cost Scottish Water £1 million to prepare the environmental impact assessments that are required under the Natura regulations to prove that every other possible source of water that would not involve the pipeline crossing an SSSI could not be used. Scottish Water even had to prepare an EIA for Loch Ericht, which would involve the laying of a pipeline for 30 miles at a cost of £30 million.

I want to make constructive points, rather than to contribute to the unedifying spectacle of a competition between the Labour and Tory parties about whose record is worse.

Brian Monteith (Conservative, Mid Scotland and Fife)

Will the member give way?

Fergus Ewing (Scottish National Party, Inverness East, Nairn and Lochaber)

I will give way to the member later.

All of us want to preserve and protect our environment, but the current policy is not what is required. It is a greedy, gas-guzzling Cadillac of an environmental policy, when we require a normal, respectable family saloon.

From Joe Moore, the head of operations at Scottish Water, I understand that a cost of £1 million just to lay a pipeline under the ground is the norm. I know that my constituents—especially patients in the north of Scotland who are waiting 53 weeks for a liver scan—would regard that as a massive waste of money. What are we doing spending money on it? It is no wonder that our water charges are so high.

Des McNulty is right to draw attention to the fact that when we ask questions about Scottish Water Ross Finnie and his able deputy Allan Wilson say merely that these are operational matters for Scottish Water. That is very convenient. The real reason that the Tories set up the quangos and Labour and the Liberal Democrats retain them is to deflect blame and responsibility on to the quangos. Alan Sutherland and Alan Alexander get the flak, rather than the Executive.

Sarah Boyack (Labour, Edinburgh Central)

The member said that £1 million for a new pipe system seemed hugely expensive. Is he making the point that it is too expensive because someone else could provide it more cheaply, or is he saying that we should not have to pay for that investment? I am not trying to score a point—I simply want to establish what the member means.

Fergus Ewing (Scottish National Party, Inverness East, Nairn and Lochaber)

I am happy to clarify the point. The £1 million was just for the consultation. We have not begun to pay for the pipeline. We have not even reached the stage of applying for planning permission. The £1 million was spent just on securing Scottish Natural Heritage's agreement to the pipeline. What is that about? It is no wonder that Scottish businesses are complaining about their water rates. It is no wonder that the Golf View Hotel in Nairn told me that its standing charge has increased by 9,000 per cent—by 90 times.

Brian Monteith (Conservative, Mid Scotland and Fife)

Clearly, Sarah Boyack was not listening to Fergus Ewing's speech. I was, and I noticed that the member said that £1 million was spent on the study. Is this an example of the regulatory impositions that are driving down prices in England and to which Des McNulty referred, or—as we all suspect—is it an example of the fact that regulatory impositions drive up costs?

Fergus Ewing (Scottish National Party, Inverness East, Nairn and Lochaber)

It is an example of a lack of common sense.

I want to talk about fixed charges, which are anti-environment because they do not discourage excessive consumption. In South Africa, post apartheid, a system was introduced under which every household receives a supply of water per week that has been calculated to be more than ample to meet the weekly needs of a family. Excessive consumption is discouraged by the use of metering. The system that we have is the obverse of that: it encourages profligate use of water and, as the Federation of Small Businesses has pointed out, may be incompatible with the duties on companies under the Environment Act 1995, which requires companies to promote efficient use of water by their customers.

Where do we go from here? For the past two weeks, as a member of the Finance Committee, I have suggested that the Parliament should conduct a thoroughgoing inquiry into and review of Scottish Water. The inquiry should examine the claims of Alan Sutherland that £300 million could be saved. I do not accept those claims. I think that Mr Sutherland has done a hopeless job and would like to scrap the office of the water industry commissioner for Scotland, which would save £2 million straight away. However, if Mr Sutherland has said that £300 million could be saved, why is the Executive doing nothing about that? Why is there no inquiry or review? Will Labour and Liberal members block a parliamentary inquiry by one of the committees that would sort out the issue and find the solutions that every business and customer in Scotland wants?

John Farquhar Munro (Liberal Democrat, Ross, Skye and Inverness West)

No one can deny that the water system in Scotland must be upgraded: statistics reveal that about 17,000 miles of underground water pipes, most of which date back to Victorian times, need to be renewed at a cost of £2 billion.

The amalgamation of the three water authorities that existed previously made absolute sense as a way of spreading costs throughout Scotland. That was the perception. Until this year, customers in the former North of Scotland Water Authority area were paying much higher rates than were customers in the rest of Scotland, because of the geographical disadvantages of delivering the upgrades that are needed in that sparsely populated area.

I am pleased that the debate has been scheduled to address the vastly increased prices that business throughout Scotland faces. Those increases are especially galling because they seem to have affected Scotland's small businesses particularly badly. I have been contacted by businesses in my constituency that have this year received bills demanding increases of between 100 and 200 per cent. This morning we have heard reports of even higher increases in other areas.

Those increases must be considered in the context of other increases that small businesses face at the moment: increases in property insurance; the recent increase in national insurance; and the longer-term aim of increasing the national minimum wage. All those increases impact on our business community, and especially on small businesses, many of which must—because of their size—pass on cost increases to their customers in order to avoid going out of business. In the case of a small village shop, the rising costs will have to be paid by the most vulnerable members of the community—those who do not have cars and who are on low incomes, such as the unemployed, the disabled and the elderly. Rises in water charges must be considered in that context.

When the water boards were merged into Scottish Water, the water industry commissioner gave the commitment that overall charges would not increase by more than 7.8 per cent. I would like to ask the commissioner why the charges of a constituent of mine have risen from £217 to £420, which is an increase of almost 100 per cent. I do not believe for one minute that the commissioner would regard that as being something like 7.8 per cent.

In another case, a constituent read in the local newspaper a Scottish Water advert that claimed that people's charges would be reduced if they installed a water meter—a very attractive proposition. My constituent did not use a great deal of water and so had the meter fitted. When the first bill arrived he found to his amazement that his water charge had almost doubled. Scottish Water is backtracking quickly in that case, but no real solution has been arrived at. Questions must be asked about the need for a commissioner: if a commissioner cannot control increases, is there any need for the job?

Many members will have received numerous complaints about water and waste-water charges. For industry and commerce, we all accept that the situation is especially bad. The decision to apply standing charges has penalised the smaller water user, small businesses and domestic users. It does not encourage water conservation, which is the plea of Scottish Water. Similarly, high standing charges for meter customers do not convey the appropriate price signals: people go on to a meter and are then whacked with a great extra bill. The charges do nothing to promote efficient use of water in Scotland, which is Scottish Water's objective.

Scottish Water must listen to pleas from industry, commerce, domestic users and people who are trying to make a living in our country. If the current charges continue, we will see a vast decline in the small business community and in larger industry and commerce.

Trish Godman (Labour, West Renfrewshire)

I ask members to keep their speeches to five minutes. I will try to call as many members as I can.

Shiona Baird (Green, North East Scotland)

You will be pleased to know that my little speech is probably only about three minutes long; I believe in short and sweet.

The Scottish Green Party believes that the supply of water is a basic human right and, as such, must remain in public ownership. In this country, for most of the time, we have a superabundance of water, but we must still look carefully at how we manage what is becoming an increasingly valued resource. Scottish Water has had a huge problem in being saddled with debts that were written off in England and Wales. There, not only were debts of £4.95 billion written off, but the Westminster Government invested £1.5 billion to kick-start all the improvements that are necessary. Should privatisation go ahead in Scotland and that amount of subsidy not be available, there would be even more asset stripping than in England. How could a privatised Scottish Water make any profit with the improvements that are needed, the huge salaries that would have to be paid to the directors, and the dividends that would be required to keep the shareholders happy?

Murdo Fraser (Conservative, Mid Scotland and Fife)

The member makes some interesting points, but the water industry in England is privatised and yet is delivering better quality water, better quality infrastructure and better investment at a lower cost to the consumer. Given that that is the case, how can all the things that the member says are wrong with privatisation be true?

Shiona Baird (Green, North East Scotland)

When we look into the matter we find that things are not quite as straightforward as Murdo Fraser suggests. It has been pointed out that the water authorities in England and Wales have had 10 years. I hope that we will be able to achieve improvements without going down the dangerous road of privatisation.

Alex Johnstone (Conservative, North East Scotland)

Is the member saying that her priority, for political reasons, is to retain water services in the public sector regardless of any advantages that may or may not accrue from any other model?

Shiona Baird (Green, North East Scotland)

We want to ensure that people can use the water resource without it costing them too much. We have to consider what privatisation actually costs in the long term.

Alex Johnstone (Conservative, North East Scotland)

Look south.

Shiona Baird (Green, North East Scotland)

I do not accept that. Everyone knows about statistics and damned statistics, and that we can interpret figures in different ways. The Conservatives are not mentioning the amount of misery that was caused in England when some domestic customers' water supplies were cut off.

Brian Monteith (Conservative, Mid Scotland and Fife)

Will the member give way?

Shiona Baird (Green, North East Scotland)

Blooming 'eck!

Brian Monteith (Conservative, Mid Scotland and Fife)

The member asks us to remember instances of people being cut off, but is she aware that in Scotland it is illegal to cut people off? Is she aware that some £700 million of regional water debt was in fact written off by the Treasury when the English water companies were privatised?

Shiona Baird (Green, North East Scotland)

I am sorry—I did not follow that point. Does the member mean that £700 million was written off for Scottish Water?

Brian Monteith (Conservative, Mid Scotland and Fife)

Yes.

Shiona Baird (Green, North East Scotland)

I am pleased to hear it, but obviously we still have things to do, and I might make a few suggestions later.

The water industry in England and Wales is as heavily regulated by the Office of Water Services as Scottish Water is by the water industry commissioner for Scotland. With privatisation, there would be no real competition in the accepted sense. Consumers would not be able to change their water supplier, but would be tied to the company that supplies water in their area. To privatise the water industry at this stage would cause major disruption and do nothing to address the real issue that many businesses face, which is high water bills that cause businesses to consider closure.

Small businesses are the backbone of the Scottish economy. I feel that the Executive's role must be to take an overview, to consider causes and effects, and to take action if one area of its responsibility is suffering because of actions in another. Could the Executive consider ways of creating a more level playing field? The most important thing would be to remove the cap on public funding so that the burden of years of debt and poor investment is not funded simply by higher and higher water bills.

Another practical solution would be for the Executive positively to encourage incorporating the idea of reuse of waste water for industry when facilities are being upgraded, and to incorporate water-saving devices in new-build homes as well as encouraging their use generally. [Applause.]

Trish Godman (Labour, West Renfrewshire)

I call Elaine Murray. Elaine Murray?

Elaine Murray (Labour, Dumfries)

I am sorry. I did not hear because I was too busy clapping.

I, too, am familiar with the problems of small businesses. A fairly small number of small businesses have come to me about their water charges, but I have been a bit disappointed in the actions of Scottish Water in looking into their problems: responses have been standard responses rather than individual responses. However, we must not forget Fergus Ewing's point that Scottish Water inherited significant problems from the three quangos that were set up by the Tories when they took water out of local authority control. We must also not forget the 18 years during which the Conservatives starved local authorities of cash. As Des McNulty said, the current situation is the result of a long period—

Alex Johnstone (Conservative, North East Scotland)

rose—

Brian Monteith (Conservative, Mid Scotland and Fife)

Will the member give way?

Elaine Murray (Labour, Dumfries)

No, I want to get on. I am not even one minute into my speech.

It was considered locally that the council in Dumfries and Galloway provided a good service, although it might be debatable whether the council could have dealt with some problems that have arisen since to do with compliance with European legislation. However, that is more than could be said of West of Scotland Water, which was unpopular throughout Dumfries and Galloway. My experience of Scottish Water is that it is more responsive than was West of Scotland Water—David Mundell could confirm that following discussions that we have had about the sewage treatment works in Langholm. Scottish Water seems to be more willing to discuss those problems and more willing to discuss matters with the Scottish Environment Protection Agency than was West of Scotland Water, which described SEPA as the Taliban and did not want anything to do with its recommendations. I am therefore prepared to give Scottish Water a bit of time to demonstrate its capabilities.

We must not forget that the Conservatives voted for Scottish Water less than 18 months ago. If they were so opposed to the idea of Scottish Water, why did they not vote against it? Why did they not come out and propose privatisation at that time? Is it not actually the case that they were aware, and continue to be aware, that privatisation of water is extremely unpopular with the Scottish electorate? The Conservatives knew that a Scottish parliamentary election was coming over the horizon, so they did not dare to talk about their plans for privatisation.

Alex Johnstone (Conservative, North East Scotland)

During the past six years, when has the Labour party given the people of Scotland the opportunity to choose between massively expensive water services and an alternative structure that could deliver a more efficient service?

Elaine Murray (Labour, Dumfries)

We have given them two such opportunities—in May 1999 and on 1 May 2003.

Murdo Fraser (Conservative, Mid Scotland and Fife)

The Labour party lost seats at the 2003 election.

Elaine Murray (Labour, Dumfries)

We did not lose as many seats as the Conservatives did.

The Tories are simply dressing up their desire for privatisation in the clothes of mutualisation. That represents an extraordinary conversion from Conservatism to the Co-operative Party, which I simply do not believe has happened. Mutualisation was discussed extensively before the passing of the Water Industry (Scotland) Act 2002, which brought Scottish Water into being. Mutualisation was not at that time considered to be suitable because we felt that it would not be able to address some of the industry's significant problems.

The Tories' real agenda continues to be privatisation of the water supply in Scotland, so let us examine what the results of privatisation might be.

Brian Monteith (Conservative, Mid Scotland and Fife)

Does the member agree that Standard Life is a private company and a mutual, and that making Scottish Water a mutual company—returning it to private ownership—is, by definition, a form of privatisation? Is the member not splitting hairs?

Elaine Murray (Labour, Dumfries)

I am not splitting hairs, because a mutual company would still have major infrastructure difficulties and would have to borrow money on the private market.

Privatised water companies might well be interested in the densely populated areas of the central belt, where a lot of money could be made, but I do not believe that they would have any interest in sparsely populated rural areas such as Dumfries and Galloway, where we have many problems. In my area, we need investment to address infrastructure issues and we have planning blight because our sewerage system is insufficient to cope with new development. No private company would have the slightest interest in resolving those issues.

If Scottish Water were to be broken up into smaller private companies, we would have no guarantee that the jobs that we have tried to keep in Dumfries and Galloway through cross-party co-operation—unfortunately, those efforts have been unsuccessful—would even remain in Scotland and not go elsewhere, as has been the case with some of the companies that the Conservatives privatised, such as BT, whose jobs we see going to India. The Tories' plans would offer no such guarantee to my constituents in Dumfries and Galloway.

Jim Mather (Scottish National Party, Highlands and Islands)

The issue of higher water charges by Scottish Water first came to my attention in late April, when I took a call from a silversmith in Mull who told me that his water bill had increased by 300 per cent to almost 1 per cent of his meagre £50,000 turnover. He was angry about having to pay out a far larger proportion of his profit and he communicated his message well. Since then, the increased charges that have been imposed by Scottish Water have united opinion along the whole spectrum of Scottish life into a single voice of condemnation and a single cry for help, which the Parliament cannot ignore.

Normally moderate people—such as Bill Anderson of the Forum of Private Business and John Downie of the Federation of Small Businesses—are taking a strong and vehement stance on the matter. Bill Anderson calls for transparency; he questions the openness of the Government and voices genuine resentment about what he calls another stealth tax. John Downie seeks a full inquiry into the water industry in Scotland. That gives us some indication of the messages that they are getting from their hard-pressed members. Although such messages send a clear signal, which is backed by hard data, that smaller businesses are being hit disproportionately hard, it should be noted that large organisations are still being asked to pay significantly more than are similar entities in England and Wales.

Scottish Water is attempting to cope simultaneously with the amalgamation of its constituent parts into one organisation, with many years of material underinvestment, with high interest payments, residual organisational inefficiencies, limited borrowing powers, compliance with the water commissioner's directions and with the rapid move to harmonised billing. In making that attempt, it would appear that Scottish Water is able neither to provide the necessary investment, nor to buffer its customers from the resultant costs.

As we know, those costs are considerable and are damaging the Scottish economy. They are deterring and limiting future investment by loading the dice even more against inward investment; by making the expansion of existing businesses less attractive; by reducing its spend with contractors and cutting back on many local projects—for example, primary sewerage treatment systems are being cut back to secondary sewerage treatment systems; and by limiting local commercial and residential development as a result of the failure to upgrade infrastructure, which inhibits growth.

The privatisation route is incapable of transforming the situation, because it would give up control of a monopoly utility without ensuring that our charges would converge with those elsewhere. It would offer no guarantee that the appropriate level of investment would be forthcoming or that the private owners would care about the impact of their service and charges on jobs and growth in the wider Scottish economy.

Brian Monteith (Conservative, Mid Scotland and Fife)

The member referred to the problem of there being a monopoly. Does that mean that he supports competition between water companies and common carriage over the network?

Jim Mather (Scottish National Party, Highlands and Islands)

I support competition across the board, but it is wrong when, as in the present case, we are talking about a monopoly service. Another example of such a monopoly service is a service provided by a single ferry, such as that which Western Ferries provides and which David Petrie—the Conservative candidate in Argyll and Bute—adamantly opposed, as did I.

John Scott (Conservative, Ayr)

rose—

Allan Wilson (Labour, Cunninghame North)

rose—

Brian Monteith (Conservative, Mid Scotland and Fife)

rose—

Jim Mather (Scottish National Party, Highlands and Islands)

I will not give way, because my five minutes are running out quickly.

Our preferred solution is to use the vehicle of a not-for-profit trust, which would avoid the creation of a private sector monopoly utility provider and which could operate without providing the beneficial effects of competition. It would maximise the chances of meeting the convergence, investment and economic growth criteria and it would remove the cost of dividends and profit distribution. A not-for-profit trust would focus on infrastructure maintenance and development and in developing an infrastructure that fosters, rather than inhibits, growth it would be working towards goals that are a subset of those of the Scottish Executive.

Murdo Fraser (Conservative, Mid Scotland and Fife)

I would be interested to hear the member expand on his idea of a not-for-profit trust. I invite him to set out what advantages a not-for-profit trust would have that a mutual company that was owned by its customers, all the profits of which were reinvested for the benefit of its customers, would not.

Jim Mather (Scottish National Party, Highlands and Islands)

As we have seen with Standard Life, mutuality is permanently under threat from the desire to create a private company or to create a monopoly, which I am firmly against.

It is important to reflect on the urgency of the current situation, which is affecting growth in business and is making the position more difficult.

Kenneth Macintosh (Labour, Eastwood)

I thank Mr Mather for giving way in his final minute. We share his concern about the impact on small businesses. Will he explain how the Scottish National Party's model can deliver help for those businesses without having to borrow more money?

Trish Godman (Labour, West Renfrewshire)

The member should close.

Jim Mather (Scottish National Party, Highlands and Islands)

The key issue is that our proposal would open up the situation and would create a much crisper position. At the moment, the debt is £2 billion and we are paying £135 million on that which—according to my calculations—amounts to an interest rate of 6.72 per cent. It is possible to get a mortgage for 4.5 per cent, which would give us a saving of £45 million a year for starters. Our proposal would push matters into the real world and would take the issue forward.

We must have an inquiry to open up the situation. There must be a comprehensive review of the financial make-up of Scottish Water and Scottish Water must be benchmarked against other organisations. That would let in some light and give us some fresh air on the subject.

Trish Godman (Labour, West Renfrewshire)

I have an announcement to make. This morning, the Presiding Officer has agreed to a request from the First Minister to make a statement today on the Holyrood building project. That statement will be made at 2 pm. A revised daily business list will be issued shortly.

Sarah Boyack and John Scott will both have three minutes.

Sarah Boyack (Labour, Edinburgh Central)

The debate has proved, once and for all, the extent to which the Tories are obsessed with privatisation. They are obsessed with the ownership of organisations rather than with what those organisations do in practice. Murdo Fraser provided no historic context and did not accept the fact that the investment in the English water industry was made a decade ago.

Murdo Fraser (Conservative, Mid Scotland and Fife)

That investment was made because the companies were privatised.

Sarah Boyack (Labour, Edinburgh Central)

They were privatised by the Government, which gave them a huge subsidy. The Tories came up with no solution for us at that time, because people in Strathclyde said that they did not want a private water industry in Scotland. We had decades of underinvestment as a result of the Tories' restriction of local government finance and they offered no solution for the Scottish water industry, so it is a bit rich for them to criticise us and to demand privatisation.

Murdo Fraser (Conservative, Mid Scotland and Fife)

Will the member take an intervention?

Sarah Boyack (Labour, Edinburgh Central)

I thank Mr Fraser, but he has said enough this morning.

It is a bit rich for the Tories to criticise and demand privatisation when the massive investment that is being made is beginning to make a difference to water quality after decades of underinvestment. There is a challenge to be faced in that Scottish Water and the three previous water authorities have a huge investment to put in place in a relatively short time.

The water industry commissioner is on the side of the domestic charge payer and the big business-charge payer. We have to consider the impact on small companies, but the money has to come from somewhere.

Frances Curran (SSP, West of Scotland)

Will the member take an intervention?

Sarah Boyack (Labour, Edinburgh Central)

I have only three minutes.

If the money does not come from the taxpayer through Executive subsidies, it must come from the users. During the debate, no one has said where else that money could come from.

The Tories have an ideological obsession. The Scottish water industry is using private sector skills and investment on major projects where that is appropriate. We must ensure that that investment is made so that there is an increase in the quality of the water that we receive.

It is untrue to say—as Alex Johnstone said—that there have been no improvements. The Tories have given members the false perspective that privatisation—which no one else in the chamber wants—would be a simple fix that would solve the problem of people having to pay for investment. That does nothing to clarify how the Tories would change the reality of having to pay for that investment.

Efficiency savings are coming through—we need only compare the number of staff who are being laid off by Scottish Water with the number who were laid off by the three previous water authorities. There have already been efficiencies of scale and that must now be driven through the whole process of the £2 billion investment. It gives a false perspective to pretend that it would be better to have a private company than it would be to have a public company using private sector skills running that process.

Members throughout the chamber agree that Scottish Water faces a massive challenge, but the solution that is proposed by the Tories would be a diversion from the task at hand, which is to invest efficiently £2 billion throughout Scotland as soon as possible.

John Scott (Conservative, Ayr)

In speaking in the debate, I intend to communicate to ministers the strength of feeling about increased water charges that exists in Ayrshire and, indeed, across Scotland.

In my constituency, there is huge dissatisfaction with increased charges to households and businesses alike. Householders' water bills have risen by an average of 10 per cent, but the real outcry has come from the small business sector, where charges have doubled, trebled and, in some cases, quadrupled in the space of one year. I am talking about small businesses such as Stanley and Aileen Kaye's St Meddan's Store in Dundonald Road, Troon. It is simply not good enough that, in the past year, water bills in Ayrshire have risen so dramatically. That is why the Tories demanded to have today's debate.

Looking back in time, we acknowledge that there has been underinvestment in our water industry structure. That is why we agreed to Scottish Water being set up. As predicted, the merger of NOSWA, East of Scotland Water and West of Scotland Water produced cost savings of £100 million in July 2002. Those savings were not used to benefit the consumer or the business sector. Instead, that £100 million was returned to the Scottish Executive and the consumers received no benefit. Instead of putting charges up to current levels, the Executive could have used the £100 million partly to defray costs to small businesses at a time when it is trying hard to encourage small businesses and get the economy moving.

That is the trouble with Executive policy. On the one hand it maintains that a key priority is the creation and development of small businesses. On the other hand, it increases water charges and business rates, which continues to drive investment out of Scotland. Constituents often ask me why the business start-up rate is so low in Scotland. The simple answer is that the business start-up climate is oppressive and increased water charges are another nail in the coffin of that sector.

Big businesses also face crippling costs. BP appears to be threatening to bring court action over its £12 million water bill for the Grangemouth plant. Charities are also facing additional burdens, with the hospice in Ayrshire facing a fivefold increase in water costs as relief is phased out.

What is to be done? A good start would be to put the consumer first. Competition should be introduced into the industry, as Jim Mather—a late convert—suggested. However, the Executive has shied away from allowing competition because it says that it is afraid that Scottish Water would not be able to cope with it.

A new business structure must be created to replace the nationalised industry that Scottish Water, in effect, is. We propose that mutualisation of Scottish Water would deliver those goals and I welcome Nora Radcliffe's view that mutualisation is a good idea.

The CBI and the FSB take the view that the present system is unworkable and that a rethink of public ownership is necessary. Instead of the Scottish Government siphoning off profits or merger dividends, as has happened in the past, a mutual company would reinvest every penny of its income on behalf of its customers. It does not matter whether the business model is mutualisation, co-operation, or a not-for-profit trust; we must find a different structure that can deliver for its customers, withstand the rigours of competition, raise capital on the market for much-needed investment and, I hope, make a profit some day.

I urge the minister and members to support our motion.

George Lyon (Liberal Democrat, Argyll and Bute)

Scottish Water's introduction of standard charges across Scotland is a central problem facing businesses and voluntary organisations in my constituency as in others. Many businesses point out that the 50 per cent cut or £300 to £400 benefit that they received from the Executive through the small business rates relief scheme has been lost because of the introduction of standard charges. They are no better off financially.

No one could seriously argue that there should not be standard charges across Scotland—I do not believe that I have heard any member argue against the proposition. What causes me concern is the way in which those standard charges were introduced. It is reasonable to argue that the charges should have been phased in over a period of time. The water industry commissioner or Scottish Water should at least have conducted proper consultation with small businesses and the voluntary sector.

In April, instead of that, bills containing huge rises in charges dropped through the doors of all such businesses. There was no letter to explain the difference between last year's bill and this year's. There was no justification for the rises in the charges. Even worse, there appeared to be a clear attempt to reduce the payment options to direct debit only. No one would disagree with the proposition that everyone should pay by direct debit, but customers should be offered all the options.

All that is an unacceptable way for a business that is owned by the Scottish Executive to deal with its customers. I seek an assurance from the minister that he will examine how the process unfolded over the past 12 months, and that he will deal with and speak to Scottish Water and the water industry commissioner to ensure that what happened is not repeated. At the very least, proper consultation might have taken some of the sting out of the rise in water charges.

This morning, we saw lots of wringing of hands from the Opposition parties about the concerns of business. Every member shares those concerns—we all have small businesses and voluntary organisations in our constituencies that face the same challenges. However, when it came to the hard question about how much extra the Opposition parties were willing to put on the table to soften the blow to business, there was a deafening silence. They offered not one penny more in the manifestos on which they fought the election. Let us have less of the hand wringing and indignation unless parties are willing to put money on the table to soften the blow to businesses.

Scottish Water was set up less than a year ago. As Shiona Baird so rightly said, it is ridiculous to suggest that we should break up the organisation before it has got into first gear. It is essential that it be given time to work and that the efficiencies demanded by the water industry commissioner come into play.

I support the amendment in Allan Wilson's name.

Richard Lochhead (Scottish National Party, North East Scotland)

The water supply situation is not just an issue for Scotland; it is an issue for the whole world. In my e-mail inbox this morning, there was an announcement of a speech entitled "The world water crisis: a Scottish initiative" to be given by a prominent individual to the Scottish Parliament's international development group. It made me think that perhaps the minister's opening speech should have been entitled "Scotland's water crisis: lack of initiative".

The Executive's amendment is extremely complacent and seems to tell those small businesses whose plight we have been discussing that they must grin and bear it and everything will be all right on the night.

Des McNulty's speech illustrated that the lead minister Ross Finnie's diary contains no meeting with Scottish Water, yet when Elaine Murray, the minister's colleague, stood up and said that she was unhappy with Scottish Water, the Deputy Minister for Environment and Rural Development nodded his head. We know that, at this time, ministers are taking no action whatever to hold Scottish Water to account. That is far from satisfactory.

Since the Parliament was set up in 1999, it has wrestled with the water problem. The background to the issue is that, for the first time in about 50 years, we are looking to invest in infrastructure that was neglected for about 100 years. I say to Des McNulty that it was neglected not only by Tory Governments in London, but by Labour Governments, which he conveniently forgot to mention. The issue is another one on which London has let down Scotland for decades. At last we have a Scottish Parliament that can try to improve matters.

Of course, investing in sewerage and water is not particularly sexy, which is why local councils, Labour councils and UK Governments did not invest in them. However, if there is one revelation from this debate, it is that we have found an issue that brings Des McNulty alive. We had the most passionate speech from Des McNulty that I have ever heard. We must have more debates on the future of the water industry in Scotland so that we can see Des get passionate.

The issue that we are discussing has led to an increase in household bills and bills for non-domestic premises. The situation has been so dire in recent years that we even saw the Executive trying to withdraw water rates relief for charities, although, thankfully, we managed to stop the Executive doing that completely. Today, the debate has been largely about the impact on small businesses. As constituency representatives, we all have examples from our own areas of local businesses that have been hit hard by huge rises. I know about the fish processors in north-east Scotland, which are operating with 1 per cent profit margins yet have seen their bills go up by several hundred per cent. John Farquhar Munro and Fergus Ewing gave other examples.

The difficulty is that my party and other parties in the chamber supported a merger of the water authorities to improve matters, yet although the Minister for Environment and Rural Development said in the stage 3 debate on the Water Industry (Scotland) Bill that one of the reasons why the Executive was merging the water authorities was because it did not want rises in charges that were "out of the ordinary", today we are talking about increases of several hundred per cent. Clearly, there is more work to be done.

We must have a financial review. The debate should not be about the ownership of Scottish Water; it should be about the financial arrangements for Scottish Water, so that we can change them. It should also be a debate about scrutinising current expenditure, because we are not scrutinising hundreds of millions of pounds of expenditure by Scottish Water each year. We know that the Executive is not scrutinising that expenditure, because it does not even speak to Scottish Water. We know that there is no appointment in Ross Finnie's diary to meet Scottish Water.

We are constrained by the United Kingdom Treasury's spending rules, which is another illustration of why this Parliament should have more financial powers, so that we can take decisions about how our public authorities are financed. At the moment, borrowing is limited because of UK spending rules, so we cannot do what is best for customers in Scotland.

Allan Wilson (Labour, Cunninghame North)

Will the member give way?

Richard Lochhead (Scottish National Party, North East Scotland)

If the minister had been earlier, I would have let him in.

We must hold Scottish Water to account. We must ask the Alan Alexanders of the world whether they are doing a good job for customers. If they are not, we must do something about it.

Westminster never showed any leadership in relation to the water industry in Scotland. It is about time the Executive showed some of the leadership that has been lacking.

Allan Wilson (Labour, Cunninghame North)

First, I congratulate Richard Lochhead on getting a reference to fish into a debate on the water industry—it was the pièce de résistance—but he is fundamentally wrong. The debate is a retro debate that reminds me of the 1980s and the bleak 1990s. We are talking about the public-versus-private position. I am grateful to the Tories for reminding the Scottish public just what they are missing without a Tory Government.

I listened with interest to members' comments, and to the different proposals from members of my party and others. Of course I am concerned for the environment generally and that the people of Scotland should receive good-quality water for drinking. Of course we are concerned that people should pay a reasonable price for service delivery. That is why we are investing in our water infrastructure.

Frances Curran (SSP, West of Scotland)

Why is the Executive forcing Scottish Water to finance its investment programme with a public-private partnership, instead of allowing it to borrow public money? That means that Scottish Water is borrowing private finance, which is more expensive, and that the charges are being placed on water consumers. Why will the Executive not allow Scottish Water to borrow public money from public bodies?

Allan Wilson (Labour, Cunninghame North)

We could not have a retro debate without a contribution from the Revolutionary Socialist League, for which I am grateful. Nobody answered the question that I posed: how could a mutualised or a privatised model, or a public-sector trust, borrow money more cheaply from the Executive? They could not. It is impossible.

Brian Monteith (Conservative, Mid Scotland and Fife)

The minister is right to pose that question, but it is the wrong question. The question is not whether the money can be borrowed more cheaply, but whether the cost of that dearer borrowing can be offset by efficiency savings. In England and Wales, the cost is being offset, but up here we have not yet had that advantage.

Allan Wilson (Labour, Cunninghame North)

Efficiency savings can be made in either the public or the private sector. It is not the prerogative of the private sector to argue that efficiencies cannot be made in the public sector. It is straightforward.

I argue that replacing the current public-sector model with a mutual or a privatised model—and I accept that they are essentially the same thing—would be highly disruptive, would add to Scottish Water's borrowing, and would increase customer costs and charges.

John Scott (Conservative, Ayr)

Will the minister give way?

Allan Wilson (Labour, Cunninghame North)

Such a model would also need to be financed by payments to bond or dividend holders, at additional cost to customers.

Alex Neil (Scottish National Party, Central Scotland)

Will the minister give way?

Allan Wilson (Labour, Cunninghame North)

With respect, Alex, I would like to develop the point.

I am grateful to my colleague Sarah Boyack, who mentioned that, in England and Wales, privatisation meant that some Government-funded debt was written off and the rest was replaced by shareholder equity, which the companies have to remunerate by paying dividends. Alex Johnstone and Murdo Fraser argue that competition in England and Wales has resulted in lower prices for customers, so we should use the water services bill that we intend to introduce to increase competition, but I argue that that is a misunderstanding of the situation in England and Wales. The water companies in England and Wales are, in effect, regional monopolies. They are not subject to direct competition. As Des McNulty said, effective regulation in England and Wales by the Office of Water Services—Ofwat—has led to lower prices there.

Murdo Fraser (Conservative, Mid Scotland and Fife)

The minister seems to be saying that the reason why Scottish water charges are so high is that we do not have effective regulation in Scotland, so what is he going to do about that?

Allan Wilson (Labour, Cunninghame North)

That is why the water industry commissioner for Scotland benchmarks Scottish Water's position against the performance of the Ofwat-regulated companies in England and Wales. That is the purpose of the exercise. That is why we have to increase the efficiency of Scottish Water, so that charges will come down.

Alex Neil (Scottish National Party, Central Scotland)

Will the minister give way?

John Scott (Conservative, Ayr)

Will the minister give way?

Allan Wilson (Labour, Cunninghame North)

I give way to Alex Neil.

Alex Neil (Scottish National Party, Central Scotland)

I appreciate being allowed to intervene at the second chance, minister.

We heard that under the current private finance initiative-type arrangements the average rate of interest that is being paid by Scottish Water on moneys borrowed is 6.72 per cent. What would the percentage be if the money was borrowed at the current rate from the Public Works Loans Board? What would the difference be?

Allan Wilson (Labour, Cunninghame North)

This is the mythical model that Alex Neil's colleagues propound, under which, somehow or other, Scottish Water's £2.2 billion debt could, like a credit card debt, be taken to another loan provider to secure a lower rate of interest. Which one? Who would provide that?

Last year, the Parliament considered in detail the best way to structure the industry to suit Scottish circumstances and to ensure the best deal for Scottish people. We decided then—correctly—that there should be one public corporation covering the whole of Scotland. We decided that Scottish Water would be held to account by drinking water, environmental and economic regulation and that it would be answerable to the Parliament. Nothing that I have heard today has convinced me that that structure, set up by Parliament only last year, does not remain the best way to deliver water services to the people of Scotland.

I urge members to reject the motion and to accept the Executive amendment.

Trish Godman (Labour, West Renfrewshire)

Before I call Brian Monteith to wind up, I thank him for agreeing to cut back his time to allow other back benchers in. You have just about six minutes, Mr Monteith.

Brian Monteith (Conservative, Mid Scotland and Fife)

The debate has been interesting and entertaining in some respects and it has shown the main parties' true colours. It has shown just how wet or dry, economically, some of the parties are.

The SNP is certainly a wet party. It has shown in its amendment and in its members' speeches that it still bitterly hates the profit motive. Not for profit is the solution to everything with the SNP. We also found out that private monopoly is bad, but public monopoly is good. There is clearly a dislike of profit, except, of course, the profits of Brian Souter, which the SNP would certainly welcome, even though he makes them from a privatised industry.

Then we have the Liberal Democrats, who are not so much wet as saturated. Nora Radcliffe said that we get what we pay for.

Nora Radcliffe (Liberal Democrat, Gordon)

And we have to pay for what we get.

Brian Monteith (Conservative, Mid Scotland and Fife)

And we have to pay for what we get. We have poorer-quality water, poorer sewage compliance, and a poor leakage record in Scotland. Nora Radcliffe tells us that we should remember the health scares. What about the 116 people in Grampian who contracted cryptosporidium in 2002? What about the cryptosporidium in Mugdock and Edinburgh? What about the diesel fuel allowed through Burncrook reservoir, which affected the water of 60,000 people and which was the worst case of water pollution in the UK in recent years under a public water company?

Nora Radcliffe (Liberal Democrat, Gordon)

Is the member telling us that changing the organisation would have done anything to prevent those cases?

Brian Monteith (Conservative, Mid Scotland and Fife)

Certainly, the evidence for the report into Burncrook was damning about work practices that allowed diesel fuel into the water, which workers did not report until a day and a half later, after customers complained about having diesel in their water. The whole escapade is a damning indictment of a public company and shows that safety is not predicated on whether a company is private or public.

Even though we get what we pay for and we pay for what we get, the charges for domestic and business water services are higher in Scotland, despite the fact that things are worse. We certainly do not get what we pay for.

I turn to Labour. It was interesting to see Des McNulty become so animated for once, but he still did not have the confidence in his arguments to take interventions. It was clear from those arguments that he has a selective memory of why we are paying higher prices for water, both domestically and in business.

John Swinburne (SSCUP, Central Scotland)

I have listened patiently and I have not heard one word about senior citizens. Council tax took away one third of the most recent rise in their pension. They spend a disproportionate amount on water rates all the time. That situation is far more important to them than is the percentage increase in small business rates, because they are living on a tiny fixed income. Something should be done in the Parliament to alleviate their position.

Brian Monteith (Conservative, Mid Scotland and Fife)

That point is well made and it helps to explain why older people generally are more disposed to vote for the Conservatives, knowing that our policies would deliver cheaper water.

I return to Des McNulty's point. I agree—mea culpa—it was the Tories' fault that we have dearer prices. What did we do wrong? We lost our nerve in the 1980s and the 1990s when we did not deliver the privatised water that we should have delivered. That is the mistake that we made. Of course, members of other parties were the very ones who created the climate that ensured that three secretaries of state ran scared from privatising Scottish water.

We recall the Strathclyde referendum. Lord Ewing—the former Labour MP, Harry Ewing—told the House of Lords, with a straight face, that if water were privatised, church ministers would have to conduct mass christenings, because they could not afford more water. That was the standard of debate back then.

Kenneth Macintosh (Labour, Eastwood)

If that was the strength of the argument, how come all the Tories, who must have been much younger in those days, did not win any support in the Strathclyde water referendum?

Brian Monteith (Conservative, Mid Scotland and Fife)

There is absolutely no doubt that the mood of the public was against privatisation. There were higher water charges in England and scare stories, so the outcome was no surprise.

Having taken interventions, I shall move on to my conclusion. It is clear that a large amount of public debt had to be written off. Some £3.9 billion of public debt was written off in England, but then the water companies went out and borrowed £52 billion to start improving. Debt is not the issue; the efficiency savings and returns are the issue. Profit motives can drive companies to deliver what customers want.

I come to my conclusion, having cut out even more of my speech to accommodate members. It is clear that there are alternatives. We should look to the dry alternative of ensuring that the profit motive delivers companies that produce what customers want—safe and cheap water when they need it. Mutualisation is an admirable beast. It has been adopted in Wales and there is no reason why it should make a difference to standards; in fact, we believe that standards, and the price, could become better.

I support the motion.

Care Homes for the Elderly

Murray Tosh (Conservative, West of Scotland)

The next item of business is a debate on motion S2M-161, in the name of David Davidson, on care homes for the elderly. There are three amendments to the motion. I invite members who want to speak in the debate, the timing for which will have to be precise, to press their request-to-speak buttons now.

David Davidson (Conservative, North East Scotland)

We all acknowledge the fact that we have an aging population, in large part because of improved medical care, which was probably provided in the 18 years of Conservative rule. It is essential that those who need it have the comfort, protection and support of a care or nursing home place when they can no longer be supported or cared for at home or with their family. I am sure that we all agree that our older people deserve to keep their dignity and quality of life in their later years.

My motion begins by referring to the current funding crisis in the Church of Scotland homes, but that is just an example, because the motion applies equally to the rest of the voluntary and private sector homes. Those two sectors have contained their costs and operate more efficiently than do many council homes. However, many are being squeezed further, in that they are losing relief on water charges over a five-year period, which will cost them several thousands of pounds a year. They are now charged around £1,000 a year for waste collection and of course there was the iniquitous national insurance rise last year from the Westminster Government.

Despite the review group that was set up in 2001, which stated that both nursing and residential homes in Scotland were being publicly underfunded, we still have a crisis two years on. In February 2003, after a stand-off, the care homes reluctantly agreed an interim £80 million package. That gave a £332 to £360 per week range for residential support and £390 for a nursing place. The review group is due to report back in September this year.

The homes themselves want to use a report from the Joseph Rowntree Foundation, which recommended that to cover costs payments of £400 per week for residential homes and £459 for nursing care would be required. Joe Campbell, the Scottish Care chief executive, said:

"My view is one of disbelief that the Executive and COSLA have talked incessantly about the need for discussion, yet refuse to talk about the real costs involved in caring for the elderly and vulnerable members of our society."

Ian Manson, director of social work at the Church of Scotland, said:

"While we believe that the cost of residential care is significantly greater than £346 per week, we have reluctantly agreed to accept this baseline figure".

This week, however, Mr Manson tells us that the offer for 2003 of £346 for a residential place and £406 for a nursing place does not compare to the church's own costings, which show a need to recover costs of £390 and £460 respectively. Church spokesmen are quite honest about the fact that if that cost is not met, they just cannot go on. The church's resources have been bled dry, it has spent millions on updating homes and it just does not have the cash flow to offer a service to nearly 900 people in its homes, to say nothing of the people who work there.

Despite matters coming to a head in the church, it seems from the answer to a parliamentary question that I got from the Deputy Minister for Health and Community Care that the Executive, the Convention of Scottish Local Authorities and the independent homes will not meet until 29 July. In the light of the current crisis, I call on the minister to announce today that he will bring forward that meeting and agree to meet urgently with all parties concerned.

Why is it that, despite all homes having to meet the care commission's standards, local authorities—particularly Labour ones—appear to pay themselves more for places in their own homes? Why, if we need the places, is the Executive allowing that inequality to continue? How can the minister see that one home system pays one rate to itself, while looking at other home systems, enforcing care standards on them and agreeing that they do not need so much money?

The Executive must take an interest. We need a sustainable funding agreement, so that our elderly and those needing care are not unsettled or displaced if non-council facilities are forced to close. As Sir David Steel said when he was the high commissioner at the Church of Scotland assembly:

"The crisis in these care homes has become a national scandal".

That is indeed where we are headed, and I do not believe that the church is just playing hardball to get a settlement. It has encapsulated quite neatly and fairly the views of many, many care home operators.

In some areas, the only homes are in the voluntary or independent sector. If they cannot recover their costs, what future is there for them, and what provision is there to keep people near to their family and friends? That is a big problem up in the Highlands. The SNP amendment is similar to my own motion except that it ignores completely the inequality between payments for council homes and payments for other homes. Although we appear to have SNP support, I cannot accept that they do not understand the scandal of the inequality in payments.

In the last part of my motion, I call on the Executive

"to consult with Her Majesty's Government on how people might be encouraged to make greater provision for their own long-term care."

Savings are down, and it is iniquitous that those who scrimp and save seem to be penalised while those who do not bother are looked after. We have a huge problem coming up. John Swinburne has raised part of the issue, although I am not totally in agreement with what he says, as what he proposes is not a substitute for the action that I seek from Government.

We are storing up a future funding-for-care crisis, which will hit us if the situation is not tackled soon. The Government is not doing enough to promote savings or to encourage people to look forward. In its amendment, the Executive demonstrates the Pontius Pilate approach to a problem. It pretends that it has done enough through the interim settlement and, at a time when it is needed most, it washes its hands of the problem. As a result, it even suggests that there are people in homes who need not be there. I look forward to hearing the minister's proposals to assist carer support, because I presume that we will hear how he would help people at home.

The kirk has demonstrated that its reserves have been dissipated with no hopes of recovery. Those arguments hold for other independent and voluntary providers. Will the minister give an assurance to those operators and to those who need the care, along with their families, that the Executive will take immediate action to review the payments on an even-handed basis? I ask the minister to seek the quality of care, monitor it and pay for it evenly, regardless of who provides it. Scotland is watching him today.

I move,

That the Parliament notes with concern the threat of closure to the majority of the Church of Scotland's care homes; further notes that this crisis has occurred against a background of the Scottish Executive's assurance in the last session of the Parliament that funding issues had been resolved; believes, therefore, that this matter needs to be re-examined as a matter of urgency with a view to achieving a sustainable funding agreement and ending inequality in funding between local authority-run homes and independent homes; recognises that there is a longer term issue to be addressed by government, and calls on the Executive to consult with Her Majesty's Government on how people might be encouraged to make greater provision for their own long-term care.

Tom McCabe (Labour, Hamilton South)

It will come as no surprise that I entirely reject the motion that the Conservative party has placed before Parliament today.

In our ever-changing world, people now live longer and are more likely to survive chronic illness. Many of us are far more likely to use some form of social care service. Some will need those services more than others and some will become frail and need different kinds of care, including the kind of care that is provided by care homes. Our nation's older people deserve a reliable, dignified quality service.

Unfortunately, over the past few years, there have been a number of care home closures. The sector has been reluctant, and sometimes unable, to invest to meet future needs. In 2001, we saw regrettable disruptive action. Selected areas started a programme of action to refuse further referrals from local authorities and in some cases gave notice of withdrawal of service. The real casualties were older people themselves. The threats and counter-threats seriously disrupted the lives of many older people and their friends and families. The situation caused a great deal of uncertainty and worry, which was wholly unacceptable to a great many people and is wholly unacceptable to the Executive.

What we need is stability and confidence in the sector, gained through establishing a proper mix of care provision.

John Swinney (Scottish National Party, North Tayside)

I agree with Tom McCabe's point about the need for consistency and stability in care home provision. I am sure that he will be familiar with a project that is emerging in the Highland Perthshire area of my constituency. We have a Church of Scotland nursing home that faces a very uncertain future in the light of the board of social responsibility's discussions in the past couple of days. However, there is a proposal to reprovision that care in a much wider health care project in the Pitlochry area, involving the health service, the Church of Scotland, the local general practice and a variety of other service providers. In trying to bring stability to the area, would the minister say that that type of project is consistent with the Government's ambitions and aims in relation to the provision of care in Scotland's rural communities?

Tom McCabe (Labour, Hamilton South)

I hope that you will allow me some additional time, Presiding Officer.

Murray Tosh (Conservative, West of Scotland)

Yes. That was a long intervention.

Tom McCabe (Labour, Hamilton South)

Thank you.

I do not have a great deal of knowledge about that specific project, although I accept and understand the explanation that Mr Swinney has given of the services that it provides and the way people have come together to provide them. That is exactly the model that we would like to see sustained, both in the Pitlochry area and throughout Scotland.

On the theme of establishing stability and a proper mix of provision, implementing the recommendations contained in the national review group report will go a long way to stabilising the overall market. We have done everything possible to find significant new resources to increase fee levels. That remains a priority for the Executive and I want to see a financial structure for the care home sector that secures a better future for older people and for the care home industry.

The independent expert review group was in no doubt that both nursing and residential homes in Scotland were being publicly underfunded. Before those on the Conservative benches forget themselves, however, I remind them that those homes have been underfunded for a very long time. We have accepted that, as has local government in Scotland. That is why we have worked hard to bring local authorities and care home owners together. We recognise that care homes have faced real difficulties over the levels of fees that they receive. We also recognise that righting the wrongs of the past must be done in a way that does not adversely impact on vital services. That is why we have made an unprecedented national contribution—in time, effort and money—to improve the situation.

The independent care sector, including the Church of Scotland, accepted the Executive and local authority offer to increase care home fee levels for older people from 1 April 2003.

David Davidson (Conservative, North East Scotland)

The minister seems to be talking about the future, but there is a crisis now. Is he prepared to have an urgent meeting with those whom he has mentioned, to listen to them and examine their evidence? Many homes might not exist at the end of September, never mind next year. Will he also assure us that he will deal with inequality in the funding system between council homes and other homes?

Tom McCabe (Labour, Hamilton South)

I will go on to explain exactly how we have tackled the situation and reached agreement with all parties in the sector on what we will do in the future.

The agreement honours the earlier commitment of ministers to meet the fees that were recommended by the national review group. In the light of that group's findings, the Executive made available £52 million of taxpayers' money to local authorities from 1 July 2001 to 31 March 2003.

The agreement on the uplift of fee levels from 1 April 2003 amounts to almost £80 million above the 2001-02 baseline and provides for a 1 per cent real-terms increase a year to the fees that were recommended by the national review group in autumn 2001. That is what we have done to stabilise the market. A significant amount of taxpayers' money has been applied to address the situation.

Since 2001, average fees in homes without nursing care will have risen by 33 per cent, and there will have been an increase of nearly 21 per cent in homes with nursing care. That takes extra expenditure on the care home sector to more than £130 million from mid-July 2001 to March 2004. Such substantial increases carry forward into the baseline for future years. Therefore, how can any member accuse the Executive of having failed to deliver on care homes? The national review group made eight important recommendations and we have jointly delivered on each and every one of them.

We are committed to ensuring that quality care home services that are regulated within the framework of the national care standards can continue to play a vital role in meeting the community care needs of Scotland's older people—I know that the Church of Scotland is committed to that, too.

Mary Scanlon (Conservative, Highlands and Islands)

Will the minister give way?

Murray Tosh (Conservative, West of Scotland)

No—the minister is over time.

Tom McCabe (Labour, Hamilton South)

I assure the Parliament that I am fully aware of the Church of Scotland's financial plight. I also recognise the long and distinguished record of social care provision that the Church of Scotland has established. A review of services for the elderly is under way and a report will be presented tomorrow. I met the kirk's director of social work only yesterday and we discussed some of the church's concerns and the review. I know that the Church of Scotland is committed to a genuine effort to ensure that its care services are fit for the 21 st century.

Murray Tosh (Conservative, West of Scotland)

Minister, you are well over time.

Tom McCabe (Labour, Hamilton South)

However, it would be wrong to speculate about the detailed contents of the report. I know that the Church of Scotland intends to conduct a full consultation on the report and that no firm decisions will be taken until October. I warmly welcome that sensible approach. It is only right and proper that all who are concerned are given adequate time to consider and discuss the issues that the report will raise. I believe that the care home sector can now look forward to a brighter future, as can many of Scotland's older people.

I apologise for being over time. I move amendment S2M-161.4, to leave out from first "notes" to end and insert:

"acknowledges the problems faced by some Church of Scotland care homes but recognises that the Scottish Executive has met in full the recommendations of the National Review Group on care home fees which resulted in an extra investment of over £130 million in the care home sector since July 2001; welcomes the work currently being undertaken by COSLA and the care home sector in establishing a framework for assessing the cost of providing care for older people from 2005-06, and notes the continuing commitment of the Executive to shift the balance of care from institutional settings to providing care at home and its setting up of the national care standards which provide a quality framework."

Stewart Stevenson (Scottish National Party, Banff and Buchan)

I need to draw attention to a personal interest that could be seen as relevant to the debate—both my sister and my wife's sister are employed as nurses in private care homes.

That the Executive recognises that there is a problem is great, but it has not yet found a solution. It is also great that the minister focused on people, as they are at the core of the issue. By contrast, the Conservative motion speaks about people only in relation to funding.

It has been said:

"The crisis in these care homes has become a national scandal".

Those are not my words—they are the words of David Steel. The abandonment of our elderly people and the neglect of residential nursing homes are a badge of shame for the Executive. If only it raised the amount that was paid by the 60 per cent that Mr McCabe raised his speaking time in the debate, we would not have the current problem.

George Lyon (Liberal Democrat, Argyll and Bute)

The Scottish National Party has just fought a general election and promised not one penny extra to the care home sector. Therefore, how on earth can the member criticise the Executive?

Stewart Stevenson (Scottish National Party, Banff and Buchan)

If the member goes to section 3.1 on page 6 of our manifesto, he will find the appropriate references at the paragraph at the bottom. [ Interruption. ]

Murray Tosh (Conservative, West of Scotland)

Order.

Stewart Stevenson (Scottish National Party, Banff and Buchan)

Today, we must consider the decline in the effective funding of the sector and the decline in the number of care homes from 681 in 1998 to 605 last year. The number of beds has declined from 16,677 in 1998 to 14,851 last year, which is the lowest level since 1984. Another 880 will also leave the sector shortly if the Church of Scotland closes its homes.

As a consequence of the lack of places that are available in homes, the number of people who are waiting for discharge from hospital is at record levels—some 514 are now waiting for discharge; three years ago, 334 were waiting. There has been a dramatic uplift, which has taken place against a background of a rising trend of older people in our society.

We do not have to look far for the cause of our troubles. I say to the minister that there is more money in the sector, for which the sector is grateful, but that it is clear that there is not enough money. Weekly charges that are paid to care homes by local authorities for looking after residents fall short of the amount that is needed per resident to provide a decent level of care.

What amount is required? The figures of £390 for nursing care and £332 to £360 for residential care were mentioned by Scottish Care, COSLA, the Church of Scotland, the Salvation Army and the Scottish Executive, but it took two years for the Executive to get to the appropriate level. With money already short, we are now looking at another review that will come in only in 2005-06. If the Church of Scotland closes homes in the voluntary sector, it will make matters dramatically worse, as the people in question will have to go somewhere. Utilisations in other homes will rise. The costs that are borne by voluntary organisations will rise and there will be a cascade of further closures. The three-legged stool of the local authorities, the private sector and voluntary organisations will be unstable if one leg is sawn off.

Our elderly population deserves better than to be treated in the shabby fashion in which the Executive has treated them. The Executive must thoroughly review the true cost of care in Scotland now and take the necessary steps to do so in early course.

I move amendment S2M-161.1, to leave out from "believes" to end and insert:

"regrets that the present funding levels to the voluntary and private sectors leave vulnerable older people exposed to disruption and distress at a point in their lives when they deserve support and stability; believes that the Executive should undertake an urgent review of funding for the care home sector based on an analysis of the true cost of care, and calls on the Executive to carry out an urgent review of bed provision in care homes in order to establish and commit to a long-term plan for the sector."

John Swinburne (SSCUP, Central Scotland)

I thank David Davidson for using the Conservatives' parliamentary time to raise one of the issues on which our party fought the recent election. Residential care was one of the most sensitive issues that was raised at our meetings and we touched a raw nerve among the elderly every time that the topic arose. It was harrowing to listen to the anguish with which some people of my generation expressed their disgust at the manner in which some of their friends or relatives were being treated by the so-called welfare state.

I fully support the sentiments that have been expressed about the crisis that is being experienced by care home providers, particularly by the Church of Scotland care homes. Without doubt, there is a need for a re-examination of the exact costs of providing care for the elderly in care homes.

David Davidson's motion calls on the Executive

"to consult with Her Majesty's Government on how people might be encouraged to make greater provision for their own long-term care."

The Chancellor of the Exchequer advocates prudence at every opportunity but, sadly, all those senior citizens who exercised prudence throughout their working lives are now being penalised in their retirement by means testing, which is a throwback to the dark days of the depression of the late 1920s and early 1930s.

Means testing has no place in the 21st century. Even the World Bank does not consider it to be feasible, due to its complexity, inefficiency and high administration costs. For example, how can anyone justify two neighbours who lived in identical council houses and are now in residential care finding that the one who owns her home must sell it to pay for her care, while the neighbour who does not own her home has her fees paid by the state? That is discrimination. I implore the Executive to remedy that by removing means testing or we will seek action through the courts—we will take the matter all the way to the European Court of Human Rights if need be.

Means testing is an anachronism. A whole stratum of bureaucracy, which is maintained at a ridiculous cost to the Exchequer, is dedicated to making elderly people's lives a misery as their hard-earned savings are plundered and they are robbed by the so-called welfare state. That has gone on for far too long and it must be brought to an end now. I believe that there is now a deferred payment scheme, which indicates that some civil servants have a conscience. They will now, in certain circumstances, wait until people are dead before they plunder their resources.

Another issue that is raised continually is the variation of care from one home to another. I emphasise that the vast majority of residential homes are excellent. However, there are more than 35,000 residents in care homes in Scotland, so if 1 per cent of them are not receiving the care to which they are entitled, that means that 350 elderly people are being neglected at a time in their lives when they are at their most vulnerable.

The operation of the care commission in setting care standards is very welcome, but we must be concerned about the charging implications for homes that register with the commission. Service providers are facing greater costs because of the registration fees that are charged by the care commission, which it is anticipated will be self-financing by 2005 through the recovery of those fees. Will the Scottish Executive give an assurance that the fees will not be passed on to the residents?

I understand that visits to residential homes by the care commission should take place at least twice a year and that one visit is at an agreed time and the other is a random check. Residents would be happier if all visits were made random. I have had correspondence that urges me to advocate that relatives and friends who visit people in residential care should occasionally visit outwith normal visiting times; they may be shocked by what they see on the odd occasion.

The problem will only get worse as time goes on, because by 2040 it is anticipated that there will be more than 16 million people over pensionable age in the United Kingdom—that could include some of the members in the chamber today, so take care.

I move amendment S2M-161.3, to leave out from "there is" to end and insert:

"means testing discriminates against residents who have made provision for their long-term care and calls on the Executive to provide long-term care for the elderly without such discrimination".

Mike Rumbles (Liberal Democrat, West Aberdeenshire and Kincardine)

I am glad that the Conservatives have given us the opportunity to debate the crisis that faces the Church of Scotland. My only regret is that they have failed to allocate enough time to have the issue properly aired and debated in the chamber. The issue deserves much more than the mere 75 minutes that the Conservatives have allowed. Frankly, I go so far as to say to the Presiding Officer that there should be rules in the Parliament to end the practice whereby the Opposition parties can divide up their debating time like this. It has more to do with media soundbites than with getting a serious and detailed examination of all the issues involved. The issue is far too serious to be dealt with in this way.

John Scott (Conservative, Ayr)

Will Mr Rumbles give way?

Brian Monteith (Conservative, Mid Scotland and Fife)

rose—

Mike Rumbles (Liberal Democrat, West Aberdeenshire and Kincardine)

I would love to take interventions, but unfortunately I have only four minutes because the Conservatives are not allowing sufficient time for the debate.

There is no question that the Church of Scotland, which is the largest of the voluntary sector providers of residential care, is facing a crisis as it strives to cope with the cost of running all its 29 residential care homes.

The church's board of social responsibility has for many years highlighted its problems in running its homes within the budgets allocated from our local authorities, and the church has run with a deficit of about £6 million a year. Last week I met Ian Manson, the director of social work of the church's board of social responsibility. He outlined the crisis that the church faces. Earlier this week I met the Deputy Minister for Health and Community Care to examine the issues that Ian Manson raised.

The Executive has not been slow in addressing the issues. Back in 2001, a national review group, which included the Scottish Executive, COSLA, Scottish Care, the Salvation Army and the Church of Scotland, agreed that care home fees should be raised from £295 to £390 a week. That was a substantial rise. As recently as three months ago, a further agreement raised the fees to £406 a week for nursing and £346 a week for residential care. In addition, those figures will now be regarded as a minimum payment for local authorities and not as a guideline figure that could be undercut. Furthermore, ministers agreed to establish a working party to examine the "true costs" of care for the elderly, which met for the first time last month.

The well-respected Joseph Rowntree Foundation recently undertook its own research on care home funding. It came up with the figure of £459 a week for nursing care and £353 a week for residential care. Although there is little difference—£7 a week—between its figure for residential care and the agreed figure, there may be a funding gap of £53 each week for nursing care. The true gap could be more or less than that, but that is precisely the point. We need an accurate and agreed measure of the costs of residential and nursing care and we must be determined to achieve that.

The Church of Scotland has now completed its own review, which assesses the viability of all its homes throughout the country, and its report will be examined tomorrow. The important point to remember is that the church will not be rushing into the closure of any of its homes, but will be leaving "no stone unturned" in trying to deliver a sustainable future for them. I hope that at the very least the church will not rush to make any final and irrevocable decisions until the Scottish Executive has had the opportunity to examine the conclusions of the working group on finding the real costs of care and to take action on its recommendations, whatever they are.

I am sure that the Parliament notes with concern the threat of closure that faces some of the Church of Scotland's care homes, but the facts are that the Scottish Executive is committed to finding out the true costs of care and then tackling the issue.

I urge the church's board of social responsibility not to take any action that threatens the well-being of the many elderly residents involved before it has had the opportunity to assess the results of the working party on care costs.

Murray Tosh (Conservative, West of Scotland)

Members are aware that this is a short debate. I am looking for speeches of four minutes.

Jackie Baillie (Labour, Dumbarton)

As we have heard, demographic data suggest that we are all living longer and that the number of elderly people is growing. We must keep that context at the forefront of our minds when we debate the provision and funding of care homes.

We are fortunate in Scotland to have a diversity of care home provision from local authorities, the private sector and the voluntary sector. As we have passed the Regulation of Care (Scotland) Act 2001, we can be assured that the standards of care in each and every home, irrespective of provider, will be the best possible in the interests of our older people.

The key issue that is before us today is funding. That has been highlighted by the fact that the Church of Scotland is considering the future of its care homes throughout Scotland. It is doing that because it cannot afford to continue running its care homes at a loss. We all acknowledge that over the years it has dipped into its reserves to the point where very little is left.

I declare a constituency interest, which I know the Deputy Presiding Officer shares; it is Clydeview Eventide nursing home, which is a possible candidate for closure. It celebrates its 50th anniversary this year and is located in Helensburgh. There is concern locally about the prospect of closure. There is concern, as would be expected, among the families that are affected, but also among the wider community. There are no local authority-run homes in Helensburgh. There is insufficient capacity to meet current demand, never mind demand in the future, which, we all acknowledge, is likely to increase.

Closing Clydeview Eventide nursing home will seriously affect the quality and capacity of service delivery. Let us not forget that another consequence of closure is that hospital delayed discharges will increase in the local area.

It is worth noting, as some members have said, that there is a discrepancy between the cost of local authority-run provision, at an average of £374, and that of private and voluntary sector-run provision, at an average of £288. Although those figures are from 2001 statistics, it is still true that there is a differential. That remains the case in Argyll and Bute Council's area, which has one of the worst differentials in Scotland, with a unit cost for local authority provision of £483 and a unit cost for everyone else of £265. We need to understand why that is and address the inequality.

I recognise that the Executive has provided substantial additional resources—£130 million since July 2001—to implement the national review group report in full. Coupled with investment in free personal care and nursing care, that means that we are now delivering unprecedented resources so that older people can live with dignity and security.

I welcome the establishment, with COSLA, of the joint working group that will further examine the true costs of care and develop a method of assessing costs for the future. It is essential that we plan for the future as well as dealing with current challenges.

I urge the minister to press Argyll and Bute Council on the need to take urgent action to retain the Clydeview Eventide nursing home in Helensburgh. As I have said, the area has an increasing elderly population, already lacks capacity of delivery and, in any case, has no local authority provision.

I know that the local authority is concerned about the financial implications of funding the Clydeview Eventide home—although that would require only a small revenue commitment—because of the impact on the issue of equity for other providers.

The retention of the Clydeview Eventide home is an urgent issue. If the minister can intercede with the council, I am sure that the Church of Scotland, older people and the wider community would be most grateful.

Andrew Welsh (Scottish National Party, Angus)

To allow as many people to speak as possible, I will try to obey your time stricture, Deputy Presiding Officer.

Today's debate takes place against a background of an aging population and the fact that the elderly are living longer—issues that will not go away. A financial crisis is affecting all the sectors and the Scottish Executive will have to grasp the problem.

When the churches offering the highest standards of care and Christian service find that their care homes are bankrupting them, it is time that we all paid attention. Arguments about whether private, public or voluntary provision is best are completely sterile and detract attention from the real issue of standards of care and what those standards really cost to maintain.

The problem will not be solved simply by throwing money at it; the Executive has to take on the task of objectively calculating and ensuring the correct level of finance required. If we allow there to be a continuing decrease in the number of homes and available beds, allied to increases in the number of people waiting to be discharged from hospitals, the problem will be even more difficult ever to solve sensibly.

I have first-hand experience of the high levels of care in the range of Angus care homes that I have visited or officially opened. Angus Council provides resources at a level above nationally set levels, including the provision of care workers and domestic assistance services that the social work inspectorate describes as excellent, a care package including shopping, domestic care, social meals and a major increase in meals-on-wheels provision and a community alarms service. The council's belief is that one hour of domestic service provided at an early stage can be crucial in allowing people the choice of remaining in their homes.

The Executive must recognise demographic reality. The balance in the provision of service is shifting from residential or nursing home care to allowing people to receive the required level of care in their homes. That shift in emphasis, allowing independence and a high level of service away from the residential home setting, will free up spaces for those who require care home service provision. I commend the Angus Council very sheltered housing project to the Parliament.

By concentrating only on the—albeit substantial—financial and other problems of residential homes, there is a danger that we will miss out on the wider picture and the needs of our elderly population. We need from the Executive a recognition of demographic variety and the proper balance between residential nursing home care and the provision of services that allow people to receive the required and appropriate level of care while remaining in their community.

The care commission must strike a balance between moving standards forward and the reality of what can be afforded in achieving a proper mix of care provision.

There are no easy solutions to this complex and growing problem, but the goal should be to aim at a solution that provides what is best for the client and gives them a choice.

The Executive's opening response to this debate was brutal, disappointing, inadequate and lacking in any apparent understanding of the crisis facing the system. I urge the Executive to listen to the Church of Scotland and the other providers. The Executive must think again and act.

Brian Monteith (Conservative, Mid Scotland and Fife)

I must remark on the cheek of Michael Rumbles, who used a quarter of his precious time to complain that we had not given him long enough to speak. He supports the Government, which is his choice. If he joined the Opposition, he would have more time to speak and more opportunity to influence the length of debates.

The minister tells us that the market has been stabilised, but homes have closed and more closures are threatened. The market—a market that is distorted by the state's dogmatic intervention—is anything but stable. What has gone wrong? The facts do not lie: private and voluntary homes are being paid less than cost to take residents. There can be no justification for that. The state funds local authority homes by, on average, £150 per person more than other homes, even though standards are expected to be the same in all homes.

The minister gave an interesting answer to Mary Scanlon's question about whether private and public sector homes would be paid the same, given that standards are meant to be the same. The minister said that they would not be paid the same, and that local authority homes were entitled to recover the full cost of care—that is an admission that private and voluntary sector homes are not receiving the full cost in funding.

Mike Rumbles (Liberal Democrat, West Aberdeenshire and Kincardine)

What is the full cost?

Brian Monteith (Conservative, Mid Scotland and Fife)

I inform Mr Rumbles, although he asks his question from a sedentary position, that the full cost varies among homes. However, it is clear that the difference between the average funding for the various homes is different. It is therefore possible that, if we raised the unit funding by £50, far more homes would stay open.

In Stirling, the unit cost for local authority provision is £450, but it is £280 for private and voluntary provision. There are two reasons for the difference. One is the inefficiency of local authority care homes, which means that it makes sense to raise the payment to private—

Carolyn Leckie (SSP, Central Scotland)

Will the member give way?

Brian Monteith (Conservative, Mid Scotland and Fife)

I do not have time.

Mike Rumbles (Liberal Democrat, West Aberdeenshire and Kincardine)

No time!

Brian Monteith (Conservative, Mid Scotland and Fife)

One of the reasons I have no time is that I have already dealt with Mr Rumbles's sedentary intervention.

It makes sense to raise the payment to private and voluntary homes, so that they can not only meet their costs, but expand and drive costs down.

Examining the facts shows us that funding the costs of the private sector—even on an average basis—and therefore allowing it to expand, would enable more care to be provided for the coming demographic bulge.

There must be a recognition that overall provision must grow. At the moment, provision is shrinking. By changing the funding mechanism and doing more to ensure that people who are looking forward to their later years make savings now, we can ensure that provision is made for spending, that provision grows and that there is funding for that. That will mean that the local authority homes' call on public funds will not be as demanding as it is now.

The minister's and the Scottish Executive's resistance to implementing those solutions is the result of a dogmatic approach and ensures that this crisis will only get worse.

Donald Gorrie (Liberal Democrat, Central Scotland)

I want to make one short-term point and one longer-term point.

I would like an assurance that, if affairs come to a crisis—if talk of a crisis is not just brinkmanship and blackmail—and some old people are going to be put out on the street, the minister will intervene and give some money to the local authority or to the home directly, without any prejudice to a longer-term settlement, to ensure that that does not happen. I know that we cannot indefinitely bail out people if we do not have the money, but it is essential that, while the matter is being sorted out and a proper investigation is being carried out into what costs are fair and real, we ensure that nobody suffers in the short term, which would be a real disaster for all concerned.

Kenneth Macintosh (Labour, Eastwood)

Does Mr Gorrie accept that Ian Manson, from the Church of Scotland's board of social responsibility, has said repeatedly that there is no prospect of old people being "put out on the street", as Mr Gorrie puts it? The church has been very careful in its use of language. We should try not to scare people unnecessarily in a situation that is already difficult.

Donald Gorrie (Liberal Democrat, Central Scotland)

I certainly do not intend to scare people. I am trying to get an assurance that, if a crisis occurs for whatever reason—things are not always in our control, whether Holyrood buildings or other things; we cannot guarantee the future—the need will be met while the longer-term issue is sorted out.

Elderly people who live longer and therefore often have to be supported are a major issue affecting our society and I suggest that we explore some all-party approach to the issue. I do not mean political parties only, but an approach that involves central Government, local government, even our colleagues at Westminster—we might have some sort of joint body, which would be a step in the right direction—and those who supply the services to consider a proper long-term strategy for dealing with the issue. In politics, it is hard to look beyond the next election, but this issue will run for many years. We should try to achieve a settled way of dealing with it and get that geared up. I suggest that we investigate the possibility of having a wide-ranging review in the long term to try to get a consensus to deal with this important issue.

Carolyn Leckie (SSP, Central Scotland)

There seems to be general agreement that there is a crisis in the provision of care for the elderly. I would like to hear the minister's view on the matter. Does he agree that there is a crisis?

The point that I wanted to make in an intervention on Brian Monteith is that I am waiting for the Tories to spell out what the last line of their motion means. I hope that that will happen in their closing speech. That line reveals what the Tories are all about. They hang on to the crisis in provision of care for the elderly and bang on about the faults, numerous as they are, but then comes the killer punch:

"how ... to make greater provision for their own long-term care".

Now we know what their intention is.

David Davidson (Conservative, North East Scotland)

I will answer briefly. What we anticipate is Government encouraging participation in the discussion as to how those who earn a good wage and do not necessarily need much state provision are encouraged to make savings for themselves. There will always be people who cannot cope. We have to identify a big problem for them too.

Carolyn Leckie (SSP, Central Scotland)

There is an easy answer to that without means testing: tax those who earn more money to pay for national provision.

A disgraceful situation exists. The Church of Scotland has subsidised care homes to the tune of £23 million of its reserves since 1990. Estimates require a further £50 to £100 per resident, which means that the increased investment that is referred to in the Executive amendment needs to be doubled to save those homes and maintain current provision.

The Executive amendment also refers to shifting care into the community. That is a good idea until we examine the reality of the provision. People are waiting for perhaps four hours for their allotted care package to arrive so that they can go to the toilet. That is happening daily. Only last week, a new employee of a private agency contracted to a local authority reported to me that she, who was untrained and unprepared, was sent into homes to move and lift clients and operate hoists. Clients were desperate for her arrival, but her inability to operate equipment effectively left them hanging on even more desperately to pass urine. That is the reality of current provision in the community.

My mother has struggled to have her needs assessment implemented. As for aids and adaptations, when she came out of hospital after suffering a stroke, she waited for six months to be able to have a shower. She spent six months without a shower or a bath and was only able to be bed-bathed. That is the reality of current provision in the community.

We face a demographic time bomb. The Scottish Parliament has no powers over income tax banding, no powers to raise the higher rate and no powers over corporation tax. However, without radical taxation and redistributive measures in the long term, our senior citizens will face even more hardship and indignity in future. Care of whatever kind for senior citizens should be free at the point of need for those who require it and should be of high quality. That is a great challenge and we must recognise it honestly. There must be a commitment to provide a decent and dignified future for our senior citizens and for all people who require long-term care—not only senior citizens—without means testing. That is why I support John Swinburne's amendment.

In the meantime, catastrophe could be avoided in the short term by bridging the current financial gap. I believe that there was an underspend of £640 million last year. Labour members can tell me how. Some of that money would go a long way to alleviating current pressures. What will the minister do to solve the current crisis? Does he agree that there is one?

Christine May (Labour, Central Fife)

I am pleased that we have the opportunity to debate the subject today. My first point is the need for increased provision over the wide range of care that care homes cover.

It is interesting to think of Brian Monteith as a demographic bulge. He was right when he spoke of the growing need in Scotland over the next 20 to 30 years. Whether in the private, local authority or independent voluntary sector, we need to put our collective heads together to determine how that provision can be made, can be made sustainable, and can be made to suit the needs of those who use it. That is the basis of the work that COSLA and the local authorities are doing in a review, which is being carried out together with the care home providers. The review aims to find out what the issues are, local authority by local authority; as was pointed out, the issues are different in each area.

In spite of the Tories' public bluster in the chamber, they know that many of their supporters in the private care home sector are delighted with the Scottish Executive's £130 million investment, which will bring fees up to £346 for residential care and £406 for nursing care and which are designed to achieve equality across the range of sectors and providers. I understand that some of those who were active in the Scottish campaign have been recruited south of the border to see whether they can get the same deal down there.

In addition, there has been investment in "Fair Care for Older People", which is not means tested, so that all residents of homes, irrespective of income, are able to get personal care or personal and nursing care after assessment. That has meant that they are helped to meet the cost of their care needs.

Mary Scanlon (Conservative, Highlands and Islands)

When I spoke to the Church of Scotland in Inverness earlier this week, it mentioned the £346 but said that councils paid over twice that amount per person per week in their homes. Is that equality?

Christine May (Labour, Central Fife)

I will address that point in a moment.

I contend that the argument about whether local authorities favour their own homes over those of other providers is a spurious one because community care legislation offers choice to individuals. Therefore, positions in homes are often determined by the choice of those individuals. Nationally, 42 per cent of homes for older people are privately run, compared to 33 per cent that are run by local authorities. That choice must be expanded so that there is a range of provision.

My second point concerns nursing care, which has the fastest growing need. Throughout Scotland, nursing care is provided almost entirely by the independent voluntary sector and the private sector. Discussions are continuing between my local authority care home providers and NHS Fife to increase that capacity.

Members will know that one of the biggest success stories is developing measures to keep people in their own homes and to prevent their going into hospital or into care so that their quality of life is sustained and their longevity is assured. That is an area for which the private sector makes virtually no provision; it is almost entirely local authority provision. That means that the number of places is greater.

I have read the briefing from Ian Manson and the Church of Scotland's board of social responsibility and I have considered the range of its review. I urge the chamber to allow time for the review to be examined so that the capital and revenue issues that the Church faces can be discussed.

I support the amendment in the name of Tom McCabe.

Christine Grahame (Scottish National Party, South of Scotland)

Four years ago, I was my party's spokesperson for older people. There was a crisis for elderly people in care at that time; the crisis has simply worsened. There is no time for reviews. We have been in this chamber for four years and things are getting worse for Scotland's elderly people. We do not need to look at the statistics.

Members should read the petitions that come to the Parliament from people who are concerned about their elderly relatives. St Meddan's in Ayr has closed. Cockenzie House in Prestonpans is threatened with closure. Human misery is the result. There are people in Cockenzie House who have been moved twice already from other homes that have closed and now they are under threat of it happening again. They are frail, elderly people.

The benefit for the establishment is that those people might die off and solve the problem for them. That often happens when people are decanted.

I come to the question of the discrepancy between local authority payments and private sector payments. The private sector alone provides nursing care that is more intensive and that costs more, yet they get less money. I have never yet heard an explanation of that differential of £50 a week. However, I know that when a private nursing home does not have enough money, it often has to approach the families to make up the difference. That subsidy should not come from taxpayers.

There are horrific stories on my desk about what is going on in some of the care homes in Scotland. There is a home in the Borders where, if half the stories are true, it will be closed. I will not go into the details because they have to be corroborated elsewhere, but the home has already been reported to the care commission. Carolyn Leckie referred to part of the problem. People are being taken off the streets to work in care homes for low pay. They act as care assistants, but they are not able to do the work; they know nothing about caring for the elderly and certainly not for those with dementia.

Mary Scanlon (Conservative, Highlands and Islands)

Does the member share my condemnation of the fact that, because of tight financial constraints, those who are self-funding in care homes are being asked to pay between £100 to £200 a week as a subsidy. Is that fair?

Christine Grahame (Scottish National Party, South of Scotland)

I never thought that I would defend private enterprise in this way, but the only place that people can get nursing care is in the private sector because local authorities do not provide it. They have been left with a dirty deal.

We could have used the benefits clawback from implementing free personal care. It was an absolute disgrace that Westminster got all that money that could have been retained for Scotland and distributed to elderly people who want to stay at home. Let us get the money back, let us fight for it. Westminster has no right to keep that money. It came from Scottish taxpayers, and our elderly people must get it back to ensure that they receive the care that they have earned and deserve.

George Lyon (Liberal Democrat, Argyll and Bute)

Everyone is right to be desperately concerned about the predicament faced by the residents and staff of Church of Scotland homes. Indeed, members throughout the chamber are united in their concern about the implications of the decision that might be announced on Friday.

Two homes in my constituency will be affected by tomorrow's announcement. Forty-two residents and 50 skilled staff will find out their fate. The prospect of closure is hanging over them. However, I must emphasise that, even if the closure goes ahead, the Church of Scotland has left the door open for a rescue plan. As Kenneth Macintosh rightly pointed out, tomorrow's decision will not be definitive.

That said, if the closure goes ahead, 42 residents will have to find alternative accommodation. As only 13 places are available in my constituency, many of them would have to move out of the area.

Mary Scanlon (Conservative, Highlands and Islands)

Will the member give way?

George Lyon (Liberal Democrat, Argyll and Bute)

I am sorry, but I have only three minutes.

The real fear for the residents is that they will have to move. Certainly that would be a huge challenge for those in the Auchinlee Eventide Home in Campbeltown, who might have to move to a care home in the central belt. The impact of travelling and on friends and relatives would be quite severe and it would mean that we would lose another vital service.

We have to hope that, in September, the working party will make recommendations that can be agreed. The Executive's track record shows that, once agreement is reached, we fund it. Indeed, we have already done so.

Bruce McFee (Scottish National Party, West of Scotland)

Will the member give way?

George Lyon (Liberal Democrat, Argyll and Bute)

I am sorry. I have only three minutes and I need to get through these points as best as I can.

Tom McCabe made it clear that we have already allocated substantial amounts of money. I hope that, when the working party's recommendations are published, we will be in a position to meet its requirements.

Jackie Baillie highlighted real concern that, according to Argyll and Bute Council's figures, the area has the biggest inequality in care home funding: the council's homes have a unit cost of £483 whereas homes owned by the private or the voluntary sector receive an average of £265. Some of that inequality is due to the fact that the two council-run homes are on islands, but no one could substantially argue that that factor accounts for the whole inequality. It cannot be explained by additional costs because of location alone. The council faces a big challenge in dealing with that matter.

I listened to the scaremongering and righteous indignation of Stewart Stevenson, Andrew Welsh and, of course, Christine Grahame. This issue is too serious to be politicised in such a way. In fact, when I challenged Stewart Stevenson on what the SNP would do with the extra money he mentioned, he referred me to the SNP manifesto. But all it says—

Murray Tosh (Conservative, West of Scotland)

Mr Lyon, there really is no time for a long quotation.

George Lyon (Liberal Democrat, Argyll and Bute)

The manifesto says only that, as a matter of urgency, the SNP will look to see what action requires to be taken to resolve the problem.

Sandra White (Scottish National Party, Glasgow)

I was about to start my speech by saying that we have had a very good debate—[ Interruption. ] If George Lyon wants to go on, that is fair enough, but I for one do not want to listen to any more of his ramblings.

The debate has been very emotive. Indeed, I see that George Lyon is getting emotional himself. We must ask a number of questions, one of which has already been answered by several speakers. If the Labour and Liberal Democrat coalition is really spending more money on care homes, why are they closing down and why is the number of places decreasing?

I think that all members know the answer to that question—I hope that I will have time to address the points that Duncan McNeil made in his speech—which is that the Labour and Liberal Democrat Executive's financial contributions are just not enough.

In its amendment, the SNP calls for an urgent review not only of the Executive's financial contribution, but of its long-term plans for and commitment to care homes. We should all support the call for such a review.

I agree with David Davidson that the meeting that is to be held on 29 July must be brought forward. Even the care home owners and the Church of Scotland say that the meeting must be held sooner rather than later. I sincerely hope that the minister will agree to hold the meeting sooner.

Stewart Stevenson was absolutely right to talk about people and not profit. We should not forget that care is about people and that people are much more important than profit.

The SNP fully supports John Swinburne's amendment, which mentions means testing, and we will vote for it at 5 o'clock. John Swinburne mentioned the announcement of inspections of care homes. I remind him that there are two types of inspection—announced and unannounced. The care commission has admitted that it has not been able to follow through the system of inspections. That is unfortunate. Will the minister examine that issue? I believe that it is not enough to have two inspection visits—and even those visits are not always carried out at present. There should be more visits, especially unannounced ones. That issue is a great anomaly in the work of the care commission and it should be considered.

Andrew Welsh and Carolyn Leckie mentioned care in the community, which is a good concept that has never been funded properly. Care in the community must be considered carefully and properly costed and funded.

I have a couple of seconds of my speech left, so I will mention Duncan McNeil who, as usual, has been muttering under his breath about spending, spending, spending. I remind him of one point: when Gordon Brown decided to go to war with Iraq, he had no qualms whatever about spending millions of pounds.

I remind members that some of the people who are in care homes have been through two world wars. It is time that we got the finger out and owned up to our responsibilities for those people.

Tom McCabe (Labour, Hamilton South)

This subject is important and deserves more objective consideration than it received in the speeches of Conservative and SNP members. In response to Andrew Welsh's rather ungracious comments, I point out that any brutality has come from the blatant distortions in the SNP amendment, not from the Liberal or Labour parties. The sooner Mr Welsh dissuades himself from using a soft voice to play games with peoples' lives, the better it will be for everyone.

Andrew Welsh (Scottish National Party, Angus)

rose—

Tom McCabe (Labour, Hamilton South)

We have heard enough of Mr Welsh's distortions—he should sit down.

It might be useful if I try to summarise our achievements to date and where we are prepared to go. On care homes, we have honoured in full our earlier commitment to meet the fees recommended by the national review group. Frankly, it is simply not good enough for organisations to sign up to those recommendations one day and then to claim that they reject them the next. Since July 2001, we have made available an additional £130 million of taxpayers' money to uplift fees in care homes. Under any interpretation, that is a significant amount. In partnership with our colleagues in local government, we have provided to care homes nearly £80 million in this year alone to increase fees. That money will be carried forward into the baseline for future years.

Our achievements since 30 November 2001—the day on which we received the national review group's report—are nothing short of remarkable. We have done our bit and I am pleased that our commitment to care home owners has been matched by that of local authorities.

Carolyn Leckie (SSP, Central Scotland)

Will the minister take an intervention?

Tom McCabe (Labour, Hamilton South)

No, I will not.

Local authorities have made an appropriate investment that underlines their long-term responsibility to care home owners. Once again, I put on record our appreciation of the way in which Scottish local authorities have responded to the challenge. I know that they will continue to do so as they discuss individual local circumstances with the Church of Scotland. I have no doubt that that will be the case with the care home in Helensburgh.

Substantial increases in fee levels have been delivered and the benefits for care home owners will continue in the years to come.

Mary Scanlon (Conservative, Highlands and Islands)

Will the minister give way?

Tom McCabe (Labour, Hamilton South)

No.

I know that the care home sector recognises the huge financial commitment that we have made to it. I also know that the sector recognises that the approach that the Executive has taken has been both reasonable and constructive.

As part of the agreements with the care homes sector this year, a working group has been established to consider a mutually acceptable framework for assessing the cost of providing nursing and residential care for older people in different parts of Scotland from 2005-06. The working group consists of representatives from COSLA and the independent sector, including the Church of Scotland, and will report by the end of November. In response to Mr Davidson, it is up to them to set their own timetable; it is not for the Executive to dictate that.

We have made it clear that we want a stable and sustainable mixed care home sector, now and in the future. That is why we have invested so heavily in the industry and it is why we want the working group to which I have referred to come up with a formula that will remove the need for annual bargaining and for the annual posturing from people such as those in the SNP.

If the Church of Scotland announces a number of care home closures tomorrow, it is important to see that in context and to consider the changing nature of social care provision. We know that the balance of care has moved. That has informed the work of the kirk's review and the forthcoming report.

The determination of the coalition Executive to stabilise the sector for the long term is as strong as ever, but I must balance any calls for future improvements in fees with other priorities in health and social care. We must balance the main priorities that we face. That is the real choice that we face, and no amount of rhetoric from forgetful Conservatives or opportunistic nationalists will allow anyone to avoid that.

We have stabilised the care home sector and we have reached an agreement that will see us through to March 2005. We are working hard to get things right to ensure that we have a new framework in place from 1 April 2005.

To summarise, we have invested more than £130 million since mid-2001 and we are spending £30 million on bringing down the level of delayed discharge, because we recognise our obligation to Scotland's elderly. We are supporting the generation of people who struggled to set up the national health service. We are repaying our debt to older people and we are acting on our promises.

Nanette Milne (Conservative, North East Scotland)

The care home funding story is a sad one. Over many years, it has caused distress to the many elderly people who had their lives disrupted when their homes had to close, or who lived with the fear that their homes might disappear in the future. The situation has caused worry and stress to the families of elderly people and to the owners and operators of independent or voluntary sector care homes, who do not want to ruin the lives of their elderly residents, but who, through no fault of their own, are forced to close down their businesses if they have become unviable. Local authorities' preferential funding of their own care homes over independently run homes has resulted in the latter closing down at a rate of three a week. That will continue until the funding gap is closed.

I welcome Christine Grahame's support for the case of private homes that provide nursing, but with inadequate funding. Her points were well made.

Christine Grahame (Scottish National Party, South of Scotland)

Will Nanette Milne support our call for the reallocation to Scotland of the benefits funds that were clawed back to Westminster as a result of implementation of free personal care for the elderly?

Nanette Milne (Conservative, North East Scotland)

I do not propose to answer that question at this point in time. [ Laughter. ] I am a new member, after all.

The Church of Scotland is a case in point, as we have heard from most members who have spoken in the debate. For many years, the church's board of social responsibility has absorbed the funding deficit, but as the deficit is now running at about £6 million a year, and as its reserves are hugely depleted, the church is facing some hard choices about the future of its 29 residential care homes and of the 880 elderly people who live in them.

The benchmark funding sum of £346 per person per week, which was agreed last year between the Scottish Executive, COSLA and the Church of Scotland board, is not enough to cover the homes' £40 million running costs. A further £50 to £100 per person per week is needed to overcome the shortfall.

The continuing work between COSLA and the independent and church care home sector to examine the true costs of care for older people is welcome. I hope that it will produce positive results in time.

There is, however, a crisis now, and many frail, elderly people could find their lives disrupted in the meantime. The Scottish Executive's amendment is simply not acceptable in the face of the current crisis. While its commitment to shifting the balance of care from institutional settings to providing care at home, and to providing a quality framework, is commendable, it does nothing to solve the immediate problem.

Members have heard David Davidson's reasons for not accepting the amendments from the SNP and John Swinburne, although we have some sympathy with them. [Interruption.] Does Mr Rumbles want to interject?

Mike Rumbles (Liberal Democrat, West Aberdeenshire and Kincardine)

I thank the member for giving way. Is she confirming that the current Conservative party policy is to fund hotel costs as well as personal care and nursing care?

Nanette Milne (Conservative, North East Scotland)

Mr Rumbles well knows the Conservative policy.

The introduction of national care standards via the Regulation of Care (Scotland) Act 2001 means that there is no longer a tenable argument that councils provide a better service. Any justification that there may have been for a funding gap has now gone. Moreover, in a recent case accepted by the Office of Fair Trading, it has become clear that the public sector is subject to the provisions of the Compassion Act 1998 and may not subsidise its own care homes at the expense of the independent sector, a ruling that I am told applies in Scotland as well as south of the border. There is no excuse for differential funding continuing and it is high time the situation was resolved.

The short-term solution is obvious: the Executive, local authorities and the voluntary sector must thrash out a deal to keep church and other vulnerable homes open. That must be done immediately.

For the future, adoption of Scottish Conservative proposals for a unified budget for health and social care, controlled by general practitioners via our fundholding policy, would allow patients' own practitioners to procure health-related social services for them. In that way, the most appropriate care for patients would be commissioned from providers in either the public or the independent sector. That would help to reduce the problem of delayed hospital discharge and ensure a level playing field for care home providers because local authorities would not be able to discriminate in favour of their own services.

A long-term solution will also have to be found, as demographic change will result in two thirds of our population being of retirement age by 2050. To answer Carolyn Leckie's comments, people of working age must be encouraged to make provision for their own long-term care. That will entail better tax incentives designed to encourage greater savings and giving for funding residential care.

Quality care for older people costs money. Staff need to be properly trained and rewarded for a difficult and demanding job. Care standards need to be raised continually. It is in the interests of the increasing population of older people that the Scottish Executive and local authorities ensure that there is a thriving and sustainable provision of care homes in Scotland, regardless of sector, and that they plan for the future. As Christine May indicated, that future planning is essential. There is enough demographic information to allow reasonably informed decisions about future need.

The current crisis in funding for care homes is a national scandal that could have been avoided with appropriate planning and dedicated financial resources. That crisis must not be allowed to continue. I support the motion.

Business Motion

Murray Tosh (Conservative, West of Scotland)

The next item of business is consideration of business motion S2M-158, in the name of Patricia Ferguson, on behalf of the Parliamentary Bureau, setting out a business programme.