Pressure on Lang over advisers on water posts

to the controversial new public water authorities, following disclosures

about the company's financial position.

Writing to Mr Lang yesterday, Mr Robertson questioned the

qualifications of consultants Andrew Rait Ltd of Edinburgh in the light

of disclosures that the company had declared losses of about #50,000 for

the past three years, had its accounts qualified in each of these years,

and has accounts for 1993 showing liabilities exceeding assets by almost

#60,000.

He has demanded answers to these questions:

* How many firms tendered for the Scottish Office contract?

* How was the tendering process advertised?

* What checks are made on the financial viability of companies chosen

to advise on key appointments?

* What information was taken into account in assessing the financial

status of the company?

The Scottish Office responded yesterday by saying it was satisfied

that Andrew Rait Ltd, who have been contracted to advise on the

appointment of chief executives to the three new water authorities,

could perform the task given to it.

A Scottish Office spokeswoman said: ''Andrew Rait Ltd was selected

through competitive tendering, and it is Scottish Office practice to

carry out financial checks on firms shortlisted for contracts. This case

was no exception.

''Mr Rait informed us of the financial circumstances of his firm and

the reasons for them -- basically that profits had been invested in a

pensions fund -- and we were and remain satsified that Andrew Rait Ltd

is fully capable of carrying through to completion the task given to

them.''

The Scottish Office advertised last week for the heads of the three

water authorities who will earn a basic salary of #80,000 a year before

performance-related bonuses are paid.

In his letter to the Scottish Secretary, Mr Robertson says checks on

Andrew Rait Ltd pose serious questions as to how the company is

qualified for advising on such senior appointments.

He asks: ''Is there not something odd about a company of Andrew Rait

Ltd's financial status doing the head-hunting for the chief executives

of water authorities with, as the advert says, 'annual income ranging

from #100m to #200m+'?''

In a statement released yesterday, Andrew Rait Ltd said it had been

operating successfully in the executive search business for 20 years and

had been responsible for more than 60 board-level appointments in the

past seven years.

The business had been run financially successfully during the past 10

years, with significant reserves being accumulated outside the company.

The statement added that ''difficult trading during the recession

resulted in financial losses which were underwritten by Mr Rait

personally, a situation which was accepted by the company's auditors,

bankers, suppliers, and clients.

''All the resulting obligations had been fulfilled in punctilious

detail. The company has been trading profitably for the last 18 months

with every sign that this will continue.''

* Meanwhile, Mr Allan Stewart, Industry Minister at the Scottish

Office, has written to Mr Robertson claiming that using private finance

to help fund the #5000m investment programme for water and sewerage to

meet new standards will help to safeguard Government spending on vital

services such as health and education. On current estimates, he said,

private finance could bring in some 20% of the total amount of money

needed.