The agency is facing a 10 per cent cut in funding and a cash crisis because it suddenly finds itself unable to recover VAT - unlike its larger counterpart covering England and Wales.
At a meeting last week, the main board of the Government's Scottish Environment Protection Agency, which came into being last year, ordered its three area offices to make cuts to fill the pounds 3m hole which has opened in its pounds 28m budget.
The eastern area is worst affected, with its emergency out-of-hours service dropped. If a severe pollution incident happens on a loch or river at night or over the weekend, the agency will not be informed until the next working day begins.
The move has angered the River Tweed Commission which oversees a salmon fishing industry worth pounds 13m a year to the Borders' economy. Judith Nicol of the Commission said: ''To have the agency responsible for river pollution available only during office hours surely cannot be right.''
Staff training and monitoring of pollution of land, water and air is being cut back in all three areas and the agency is concerned that it may be unable to meet some of its legal obligations. While the management has promised not to cut any of the 650 jobs for the time being, there is a freeze on filling any vacancies. It also regulates waste-dumping and radioactive emissions from Scotland's nuclear plants.
A spokeswoman said monitoring of radioactivity in the waters of Holy Loch, where there was a US nuclear submarine base, would cease. All plans to issue air pollution monitoring contracts were being scrapped.
Tricia Bradley, a member of the agency's West Region Board and the Royal Society for the Protection of Birds' director in south-west Scotland, said: ''In effect, they are being forced to break the law because they haven't got the money to meet their commitments.''
SEPA's main board chairman Professor William Turmeau said the situation was daft. South of the border the Government's new Environment Agency covering England and Wales was able to recover VAT. Furthermore, the Scottish agency's predecessor organisations like local councils and river purification boards had been able to recover VAT.
However, Mike Thompson of Customs & Excise said SEPA ''simply doesn't qualify'' because it is a quango receiving its funding from the Scottish Office. He said the Treasury felt that allowing it to recover VAT would open the floodgates for others.
But the Environment Agency in England and Wales is not considered to be a quango, even though it has very similar functions and duties to its smaller Scottish sister. The larger organisation expects to reclaim over pounds 50m VAT this year from the Treasury.
Dr Richard Dixon, head of research at Friends of the Earth Scotland, called on the Government to address the funding crisis. ''Instead of carrying forward its obligation to improve the Scottish environment, the agency is facing an unfair burden which means it is having to cut back its activities,'' he said.Reuse content