Ross Finnie played down privatisation fears

Environment minister Ross Finnie says the move is the only way to protect the public water industry from private competition.

But the Scottish National Party has signalled that it will try to amend the Water Industry Bill to strengthen the safeguards against the new authority being moved into the private sector.

Mr Finnie told the Scottish Parliament that ministers had no intention of allowing the industry to become fully privatised.

"The bill does provide flexibility and commercial powers for Scottish Water to survive any competitive environment," he said.

"But only further legislation could alter its public sector position and I can assure the parliament that that is not my nor this executive's intention."

Cleaner beaches

The rationale behind the bill is, according to Mr Finnie, "very straightforward".

He said: "Scotland requires a single, efficient, publicly accountable and locally responsible water authority to keep down charges and manage the investment that will assure us of first class drinking water and cleaner beaches."

The minister emphasised that a number of controls would be put in place:

• a water industry commissioner will be established to act as a watchdog and ensure that customer service is of a high standard;

• a drinking water quality regulator will also be put in place to ensure that water is clean and healthy.

Mr Finnie defended plans in the bill to withdraw water rates relief for charities.

He said he did not believe Scottish Water should be asked to subsidise a particular group of customers.

That stance found support from the Tories who said water should be no different from gas and electricity where no relief applies.

Bruce Crawford is worried about where reforms will lead

But the SNP's environment spokesman, Bruce Crawford, attacked the proposal.

He said: "Surely it can't be right that an organisation like the Children's Hospice for Scotland will be required to lose the equivalent of two full-time nurses as a direct result of the current provisions in the bill as it's now planned."

The proposals for Scottish Water have been broadly welcomed by the Tories, but their environment spokesman, John Scott, criticised the structure of the unitary authority and said it was "a gamble with taxpayers' money".

He said he was concerned the authority could effectively become hidebound in bureaucracy if the proposals are implemented as they stand.

But Mr Crawford was scathing about the proposed bill, saying it pointed to executive plans for the future of all Scottish public services.

John Scott is concerned the body will be "shackled"

He added: "Determination alone will not keep the private sector out of the water industry and no government minister, unless they are very foolhardy indeed, can say that private industry will be kept out because they know in the future it's inevitable that a private sector will gain a foothold that will mean we have one thing, the start of backdoor privatisation."

He argued that most people were concerned about the possible effects on water charges whilst the unions were most concerned about potential job losses.

It is claimed the bill will ensure �2bn of investment in new pipelines and treatment works over the next four years to bring Scotland up to new European standards.

It will also mean one water charge for the whole country.

The change comes at a time when the water industry is already shedding up to 1,000 jobs.

Managers said there could be efficiency savings of more than �130m a year.