We have been warning the Scottish Executive for many months that so-called efficiency savings will result in huge job losses in the industry

Dave Watson, Unison

He also announced that all present pension arrangements would be honoured.

The committee is considering the principles of the Water Industry Bill.

It includes plans to merge the three existing water boards - covering the east, west and north of the country - into a single authority, Scottish Water.

The bill was introduced in the Scottish Parliament in September and the committee is due to publish a stage one report in the next few weeks.

Mr Finnie said next year's merger would bring efficiency savings of between �130m and �160m a year.

Ross Finnie warned of the job losses

In reply to a question from the Scottish National Party's Bruce Crawford, he estimated that the number of people who would lose their jobs would be about 1,000.

Mr Crawford later said: "There has previously been talk about substantial job losses but this is the first time that a minister has given a definite figure.

"What is needed is a reexamination of the way expenditure is spent by water authorities."

Dave Watson of the union Unison added: "We are appalled by the announcement, but I have to say we are not surprised.

"We have been warning the Scottish Executive for many months that so-called efficiency savings will result in huge job losses in the industry.

What is needed is a re-examination of the way expenditure is spent by water authorities

Bruce Crawford MSP

"The impact of these job losses will be on customer services and health and safety."

However, a Scottish Executive spokesman moved to quash fears that the 1,000 job losses were based on the merger.

He said that the figure mentioned by Mr Finnie was based on those seeking voluntary redundancy from the existing three water authorities.

"The water industry commissioner's strategic review made it clear that Scotland's water industry would need to become more effective over the next four years, regardless of the structure of the industry," he said.

"It is inevitable that this will mean job losses."

He added that it would be up to Scottish Water to decide how it provided its services and stressed: "There are no figures available for redundancies under the new single authority."

Charges capped

Mr Finnie said that introducing a single water authority would lead to the most cost effective investment in improved drinking water and cleaner beaches.

"As the water industry commissioner's advice on charges made clear, without the move to Scottish Water, charges for all customers in Scotland would have to be much higher," he said.

He has already accepted commissioner Alan Sutherland's advice on capping the amount that customers can be charged.

That would see bills increase by about 10% in the east and west of the country - with no rise in the north.