Government officials not aware of ‘trial’ lifting expenses cap at water body

Senior figures in the Scottish Government were not aware a cap on expenses had been lifted at a body criticised by auditors for “unacceptable” spending.

In a “highly unusual” move, the Water Industry Commission for Scotland (Wics) – which has come in for criticism from watchdogs at Audit Scotland over “inappropriate spending” – lifted the cap on expenses for travel and sustenance in January 2023.

Roy Brannen, the director general (DG) for net zero in the Scottish Government and fellow senior official Kersti Berge, the director for energy and climate change, told MSPs on Holyrood’s Public Audit Committee they were unaware of the move.

While the committee heard that limits for expenses at Wics have since been reinstated, Mr Brannen confirmed he had not been aware of the original decision to remove them.

“I  wouldn’t normally be aware of those types of issues, as the DG,” he said.

“I wouldn’t ordinarily see those issues come up to my level in the Scottish Government.”

Ms Berge said she too had been unaware of the removal of the spending limit, adding: “It is a highly unusual move to do that.”

Mr Brannen went on to “accept that there were weaknesses and failures” in relation to Wics – which is the body that regulates Scottish Water.

But he said: “Now we have got all the issues out on the table and the actions are in place to address where the weaknesses were, both on the sponsorship side and the Wics side, with the leadership to drive that forward.”

David Satti, the interim chief executive of Wics, stressed that while the organisation’s board had approved the removal of the expenses limit in January 2023, changes had since been made.

He said: “We have revised our financial policies twice, the first time round was to reinstate limits.

“Those policies do have expenditure limits for travel and sustenance.”

Mr Satti added the decision to remove the limit on expenses had been a “trial”, adding the spending limits on flights at the time had been seen as an “impediment” because of high prices.

With Wics carrying out some international work, he said: “People were unable to book flights because of the limits that were in place at the time.”

But SNP MSP Colin Beattie said: “From experience in the private sector, I have never seen or heard of unlimited expenses, taking the cap off, and relying on individuals to decide if it is value for money. It doesn’t happen.”

Mr Satti said: “That is why we have changed it.”

The committee had pressed him on the issue in the wake of the latest Audit Scotland report on Wics, published in December 2024, which had found almost £75,000 of expenditure did not meet public spending rules and £20,000 did not represent value for money.

However auditors said none of this took place after December 2023 – when they first raised the alarm about Wics – prompting former chief executive Alan Sutherland to quit.

Interim chairman Ronnie Hinds, who took on the role in October 2024, said he is now working towards “turning around the fortunes of Wics as an organisation”.

Mr Hinds told the committee he had been “shocked and dismayed” by the previous audit reports into Wics.

He added: “I was shocked to witness such a severe departure from the expected standards of stewardship of public money in an organisations like Wics.

“I believe lessons have been learned, I believe they are being implemented, we’re turning a corner and I think we are transforming Wics’s governance, its management and its culture.”

He also told MSPs there are some people at Wics “who may not be with us that much longer because of the changes we are bringing about”.

Mr Hinds said Wics is looking to reduce the number of directors it has from five to four, adding: “There will be implications of that as we work our way through the organisation.

“It is hard for me to foresee that that won’t mean that some of the roles we currently have will not be roles we have in the future.”