Scottish Water: Swinney signed off on £3m of 'fat cat' bonuses
The Herald has seen confirmation that from 2010 to 2021, John Swinney was responsible for approving the payouts to Scottish Water described as "incentive plans" when he was finance secretary.
He had during that time been critical of bonus payments when paid by councils, universities and other public bodies.
The bonuses and benefits bill at Scottish Water amounted to £2.8m in the final eight years of his role.
The three key directors including then chief Douglas Millican received benefits and bonuses worth £628,000 in 2021/22 alone and it included £395,000 from a Long Term Incentive Plan (LTIP) covering a period from 2015 to 2021.
Present and past chief executive of Scottish Water - Douglas Millican and Alex Plant (Image: Newsquest) The biggest payout came in 2015/16 when the then four-man board received a total of £669,000 - including a further LTIP bonus.
State-owned Scottish Water has been included amongst the list of bodies, including Scottish Government's core directorates, its associated departments, agencies and corporations that the Scottish Government's public sector pay policy applies to. Other state-owned firms such as Ferguson Marine are not included.
The public sector pay policy says that the suspension of bonuses allows public bodies to maximise their resources to "address fair pay issues and pay awards".
The Scottish Government insists it is exempt.
It comes as water bills in Scotland increased by almost 10% in April while Scottish Water is in the midst of a bitter pay dispute with staff.
The long-standing policy says that the suspension applies to all non-consolidated performance payments.
It was Mr Swinney himself that said that bonuses would be suspended back in 2010 while saying that public sector salaries would be frozen.
And in 2015, he hit out at bonus payments totalling almost £7m paid by councils, universities and other public bodies in 2013/14.
He had said it would be a "good idea" if these organisations followed the Scottish Government's example and ended the practice of awarding bonuses at a time of continued pressure on the public purse.
He said at the time: "One of the tough decisions I took was to restrict public sector pay policy to enable us to maintain employment levels in the public sector.
"It meant also that bonuses had to come to an end and that was the right decision to protect public services and the public finances."
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But in the wake of The Herald's revelations about the extent of the latest bonuses at Scottish Water, Mr Swinney defended the awards.
He states in March in a response to questions in Parliament: "When it comes to the recruitment of leadership for Scottish Water, we are invariably in competition with other water companies around the United Kingdom.
"In that competition, the element of bonuses is part of the fabric of the financial settlements that are available to attract employees. Comparatively, bonus payments for the leadership of Scottish Water are much lower than those in other parts of the United Kingdom and the performance of Scottish Water is much higher than that of companies in other parts of the United Kingdom.
"I acknowledge that those are difficult comparisons to make, but they are part of the judgments that the Government has to arrive at on how we attract the leadership to safeguard the important asset that is Scottish Water."
Former Scottish Labour leader and current convener of the parliamentary public audit committee Richard Leonard said the bonuses should not exist and that they should go into a pay pot for the benefit of everyone.
Richard Leonard (Image: Scottish Parliament TV) He said of Mr Swinney's involvement: 'This is a failure of political leadership.
'John Swinney personally sanctioned and signed off bonuses and benefits for Scottish Water bosses for more than a decade, so we perhaps should not be surprised to see him defending them now.
"He is now choosing to use his office as First Minister to stand up for Scottish Water executive excesses rather than backing Scottish Water workers. He is on the wrong side of the argument."
In 2022/23 three key executives of Scottish Water, Douglas Millican, Peter Farrer and Alan Scott, between them pulled in £242,000 in performance bonuses and benefits which include car allowances and inclusion on a life assurance scheme on top of six-figure salaries.
But since the installation of chief executive Alex Plant in place of Douglas Millican in 2023 the executive bonuses have risen to £329,000 in 2023/24.
Mr Plant in the first ten months in post as chief executive received bonuses and benefits amounting to £170,000 on top of a £246,000 basic salary, taking his remuneration package including pension to £483,000.
Those benefits included a one-off £73,000 payment made to Mr Plant - who had previously been director of strategy and regulation at Anglian Water - to relocate to Scotland. That included £13,000 in relocation assistance, an accommodation allowance of £29,000 and a contribution of £42,000 towards Land and Building Transaction Tax (LBTT) associated with the purchase of a new permanent home.
Scottish Water has defended the salary packages saying that they maintain and operate a "simple remuneration structure" with a pay policy that aims are to "attract, develop, motivate and retain highly talented people at all levels of the organisation" and to "incentivise and reward good individual and corporate performance as well as out-performance".
But GMB Scotland has been fiercely critical of 'fat cat' bonuses as it is one of the unions in dispute with the utility over a 7% pay rise over two years which they say falls short of what other public sector workers in Scotland have received.
Claire Greer, GMB Scotland organiser in Scottish Water, said: 'The First Minister's defence of indefensible bonuses to Scottish Water executives while workers are having to fight and scratch for a fair rise is disappointing and frustrating but sadly not surprising.
Claire Greer (Image: GMB) "The same leadership team being heaped with financial rewards has led the company into a long-running industrial dispute after entirely failing to engage with the workforce in a constructive, clear and fair way.
'If John Swinney really believes that failure, that dereliction of duty at a publicly-owned company, merits such exorbitant bonuses he is living in a very different world to its workers.
"If these bonuses are really in line with the Scottish Government's public pay policy then it is not a policy at all but window dressing that is unfit for purpose and needs overhauled.'
Scottish Water, which serves more than 2.6m households, operates under an annual borrowing limit set by the Scottish Government. The annual borrowing limit controls the amount by which Scottish Water can increase externally sourced finance.
Net new borrowing by Scottish Water from the Scottish Government was planned to be to the tune of £170m in 2024/25 to carry out its activities.
As at March 31, 2024, government loans to Scottish Water totalled £4.7 billion.
Scottish Water declined to comment.
A Scottish Government spokesman said: "Scottish Water has a longstanding exemption on this point of Public Sector Pay Policy in recognition of its operating model and the need to retain staff in competition with the private sector.
"The framework for bonus payments has to be approved by Scottish Ministers who have reviewed this ahead of each regulatory period since 2007-2011. The current framework was approved in advance of the 2021-27 regulatory period.'
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