IF A POLITICIAN tells you between now and 23 May that “water charges will cost the average household €240 per year”, be careful.
His or her pledge is designed to keep you happy until your vote is cast. After that, the pledge is almost certainly unsustainable.
The fixed assets of Irish Water are not fit for purpose. An estimated 40% of product is leaking away. The system requires capital investment of €600m a year for the next decade.
And that’s the equivalent of €3,750 per household served by our newest quango. That is in addition to the €720m a year in recurring costs that are already incurred in running the water distribution system.
The top priority should be to tackle the leaking away of precious water. But while Irish Water will have a big investment budget, and while minister Phil Hogan spoke glibly last week of providing an extra €200m a year towards fighting leaks, the focus of the company is likely to be elsewhere.
Until mid-2016 at the earliest Irish Water’s contractors will still be affixing water meters to an estimated 1.1m homes at a likely cost of up to €600m.
The company’s 1.6m customers, meanwhile, are all entitled to what Hogan calls ‘one free fix’ – that is a free of charge repair of any leak occurring between the meter and the home. They’ll be asking Irish Water to dig up their gardens and drill up their footpaths to deal with any costly localised leaks.
The problem is that the leaks in your garden, the leaks between the street and your sink, probably account for only 10% of the total water lost from the system. The other 90% of the leakage, which should be getting the most attention from the engineers, arises elsewhere.
This process could be chaotic. Last week Irish Water was suggesting that 20% of homes will have no meter even when the new system goes live. That’s about 320,000 homes. But other earlier estimates, given to Oireachtas committees, suggest the ‘unmetered’ total could be up to 500,000 homes, including many or even most apartments.
And the problem is that if you don’t have an actual meter then how can you tell if you are afflicted by a localised leak?
Hogan told householders last week that the way to check for leaks was simple. You read your meter late at night. You don’t use any water till you wake up next morning. Then you examine your meter to see if it has recorded any water consumption overnight. If it has, then you’ve got a leak.
Predicting the future finances of Irish Water is no easy task.
Gaze into the glass and you won’t be looking through crystal clear water. You’ll be trying to probe the louche depths of a fairly stiff measure of anisette.
In theory a bill of €240 a year served on 1.6m homes should yield circa €400m a year.
The hidden costs
But after weeks of political infighting between Fine Gael and Labour the projected yield from water taxation is cloudy.
For a start the proposed €50 standing charge designed to pay for the cost of meter installation over 20 years has been scrapped. That’s about €80m a year.
People of limited means, like pensioners living alone, will be subsidised, apparently by Joan Burton’s Department of Social Protection. The details are not yet available, the cost of the subvention is unclear. Some reports suggest the cost is about €40m.
People with poor quality water won’t pay the full whack either. Why should they? But nobody knows how many such households there are and how the quality of your water will be measured. Will the process prompt local water tax withholding protests in areas where water is not the best?
And what of those who already pay into group water schemes? All over the country rural dwellers have been paying for water for decades. Surely their outlays must be offset against any amount they allegedly owe to Irish Water?
All these exemptions will depress the water tax yield.
And that yield will already be depressed by a general free water allowance of 30,000 litres per year, and a special allowance of 38,000 litres per year for those under 18 years.
So what is the actual net yield from the new tax? The government is not saying.
Other problems remain unquantified. The ESRI pointed out forcibly some time ago that Irish Water has recruited all the workers currently employed by local government in running the water system, in addition to its own newly recruited staff. The total complement will exceed 4,000 and may be even higher.
It is alleged that many of these people are surplus to requirements and will have to be made redundant. How much will this cost? How much will be needed to meet pension obligations? How will responsibility for such costs be allocated? Will this money have to be borrowed? Is the government looking at a repeat of what took place at Dublin Port where the number of pensioners is a multiple of the number of current staff?
The government is pledging to give Irish Water €537m a year from exchequer resources towards its running costs. It is not clear how long this subsidy will last.
These questions should be dealt with an explained by our legislators.
Obviously, the system should be made ‘fit for purpose’. This means that Irish Water should have the resources to build a proper charging system, to reform its inherited overheads and to invest funds in reducing the amount of wasted water to minimal levels.
It also needs a transparent system for imposing water charges on business users. A lot of SMEs for example deeply resent the water charges already imposed upon them by local government. Simultaneously it is believed by those who work in local government that many businesses don’t actually pay what they owe. This all needs to be sorted out, quickly.
A number to wave in the face of voters
If you consider all of the problems confronting the state’s new water company the idea of estimating the annual charge per household at €240 seems somewhat unrealistic.
The government needed a number to wave in the face of the voters as it faced into local elections on 23 May. That number has duly been delivered. But the people who produced the number may no longer be dealing with water if and when that number proves to be a complete underestimate.
Irish people have a tendency to fight about issues like this. When bin taxes – of a type used in rural areas for years – were imposed in greater Dublin for example many people simply refused to pay and went to jail. This could happen again.
If it does then the legal issues could become quite complicated. Does the citizen have a constitutional right to access to water for himself and his/her children?
Is a state company entitled to cut off that water or even to reduce the supply to ‘a trickle’?
We are not dealing with some sort of medieval siege here, if which the citizens of a walled town are starved into submission by an invading army.
Can you legally deprive a person of water if they can’t pay or won’t pay? And if you can then how do your spin doctors explain away the political consequences of the ‘desired outcome’ in one of the wettest countries on the planet?