§ Sir Hector Monro
To ask the Secretary of State for Scotland if he will state his proposals for the financing of the new Scottish water and sewerage authorities in 1996–97. 
§ Mr. Michael Forsyth
Water authorities are currently preparing charges schemes for submission to the Customers Council. The financial arrangements that I am announcing today mean that average charges in 1996–97 need increase by no more than 6 per cent. I invite the authorities to be guided accordingly in finalising their charges schemes. It is for each authority to decide upon its own scheme and on the allocation of charges, and of any overall increase in charges among different groups of customers. It is then for the authorities and the Customers Council to consider all aspects of the charges scheme. I become involved only if there remain differences which cannot be resolved.
Section 83(2) of the Local Government etc (Scotland) Act 1994 empowers me to set a rate of return which the authorities should earn on the value of their net assets. I propose that for each authority this rate of return should be 6.5 per cent. to be earned annually on net assets amounting initially to £336 million in the case of the east authority, £260 million in the case of the north authority, and £404 million in the case of west authority. The necessary order will be laid before Parliament shortly.
I have also decided that the external financing limits for 1996–97 for the authorities will amount to £274 million. The allocation to each authority will be announced shortly.
We have already undertaken to provide relief to offset the charge for domestic sewerage which from 1 April next year will be levied direct on customers instead of being a service met from the council tax. I can now announce that we will give the authorities income of £89.7 million to compensate for the charge income they will forgo in 1996–97. Of this, £27.3 million will be available to the east authority, £22.4 million to the north authority and £40 million to the west authority. The necessary order will be laid before Parliament shortly.
I believe that these arrangements which I have announced will establish the new water and sewerage authorities on a sound financial footing and will enable them from the outset to deliver a first class service at the lowest possible cost.