Inter-generational equity and the strategic review of water charges in Scotland

J.R. Cuthbert

    Research output: Contribution to journalArticle

    Abstract

    Since the foundation of Scottish Water in 2002, over 60% of its net new capital formation has been funded direct from customer charges. This runs explicitly counter to Ministerial policy at the start of the period, which was that net new capital formation should be financed from borrowing: and it effectively means that the Scottish Government has been able to use water charges as a concealed form of taxation. This paper explains how this situation came about, and identifies key resulting issues: these include:- Problems of intergenerational equity. - The question of whether funding so much capital expenditure direct from revenue was cost justified at a time of historically low interest rates. - The opportunity foregone to have lower water charges for the benefit of domestic customers and industry. Current proposals for the forthcoming Strategic Review of Charges threaten to make these issues even more acute. The paper argues that what is needed now is a thorough review of the approach to water charging, to address the above issues.
    LanguageEnglish
    Number of pages8
    JournalFraser of Allander Economic Commentary
    Volume42
    Issue number1
    Publication statusPublished - 28 Mar 2018

    Fingerprint

    Intergenerational equity
    Water
    Scotland
    Charge
    Capital formation
    Revenue
    Funding
    Water use
    Interest rates
    Government
    Costs
    Borrowing
    Taxation
    Capital expenditures
    Industry

    Keywords

    • Scottish water
    • inter-generational equity
    • capital investment

    Cite this

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    Inter-generational equity and the strategic review of water charges in Scotland. / Cuthbert, J.R.

    In: Fraser of Allander Economic Commentary, Vol. 42, No. 1, 28.03.2018.

    Research output: Contribution to journalArticle

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