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FactCheck: Who uses water most, and who pays most of the cost?

Do households really only use 10% of water, but pay 78% of the cost of funding our water system? FactCheck takes a closer look.

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Updated: 10.17pm

ALMOST TWO YEARS after becoming law, water charges remain firmly on the political agenda in Ireland, with Dáil motions to remove the charges, and the government’s nine-month suspension and expert commission expected later this year.

On Monday, the European Commission confirmed its view that Ireland’s exemption from water charges has lapsed.

In that context, Green Party leader Eamon Ryan and Brendan Ogle from the Unite union and Right2Change movement debated the future of the charges on yesterday’s Today with Seán O’Rourke on RTE Radio 1.

Ogle attacked the current regime as unfair, claiming that while the vast majority of water is used by “big business and agriculture”, households pay more than three quarters of the cost.

Is this true, though?

(Remember, if you hear numbers that you want verified, email factcheck@thejournal.ie).

Claim: Big business and agriculture use 90% of water in Ireland, but households pay 78% of the costs.
Verdict: Mostly FALSE.

  • The best data available shows households use 60% of water
  • It cannot be proven that households pay for 78% of our water system, because public funding doesn’t work that way.

What was said:

You can listen to the debate in full here. (The relevant section begins at 11.54). This is the statement in question, by Brendan Ogle:

If we’re talking about polluter pays, the situation is that 90% of water in this country is used by big business and agriculture. But the model pushed through by Alan Kelly and the last government [saw] 78% of it [the cost] passed on to households.

The Facts

29/8/2015. Anti Water Charges Campaigns Protests Source: Eamonn Farrell/RollingNews.ie

This is a complicated one, but let’s keep it as simple as possible. There are two parts to this: usage and cost.

Usage

Brendan Ogle told us the source of the first part of the claim was this document from the Global City Indicators Facility, a program of the Global Cities Institute at the University of Toronto.

It states:

Domestic water use is a small portion of total water consumption (10 percent in the European Union), trailing agricultural and industrial uses.

However, no date or source is given for that statistic, and it refers to the EU, and not Ireland.

In response to further queries, Ogle cited statistics from the UN, UNESCO, and the UN’s Food and Agriculture Organisation, which state:

Worldwide, agriculture accounts for 70% of all water consumption, compared to 20% for industry and 10% for domestic use.

The figure of 10% is a global one, and does not specifically relate to Ireland. Water usage varies hugely from country to country, and even from region to region, so we absolutely cannot infer Ireland’s usage pattern from the global total.

Furthermore, Ogle used the phrase “big business and agriculture”, when in fact he was simply referring to business (of all kinds) and agriculture.

The most recent figures from the CSO show that almost 91% of businesses in Ireland have 10 employees or fewer.

Irish Water told us:

Irish Water produces 1.7 billion litres of clean treated drinking water each day.  Approximately 47% of this is lost through leaks.
Of the remainder, approximately 60% is used by domestic customers and 40% by businesses.  This assessment is based on several verified sources of information across the business…

We asked Irish Water for raw data which would help explain the 60/40 division they stated, but they were unable to provide it.

There’s a big gap between 10% and 60%, so we looked to other sources to resolve the discrepancy.

The only other official data on water usage we could find, that is specific to Ireland and compares usage within the same year, was that of the European Environment Agency.

We collated and analysed those figures for the two most recent full years available, 2011 and 2012, and found that 62% of usage was for the public water supply.

waterusage

However, the public water supply, according to the European Environment Agency rubric, entails both domestic and industrial use. So by definition, the figure for domestic-only usage is lower than 62%.

Unfortunately, though, we cannot say exactly what that number is.

Therefore, the only figure available from an official source, relating specifically to Ireland, is the one provided by Irish Water in response to this FactCheck: 60% of water use in Ireland is domestic, and 40% is non-domestic.

The strength of this figure is somewhat undermined by the unavailability of raw data.

However, it compares extremely favourably with the figures cited by Brendan Ogle, which were both undated and did not relate specifically to Ireland.

Costs

File photo: Water charges are looming Source: Laura Hutton/RollingNews.ie

Irish Water’s total allowed revenue for 2016 is €993 million. Here’s what that’s made up of:

  • Domestic charges: €274 million
  • Non-domestic (business) charges: €240 million
  • Local Government Fund: €479 million.

The Local Government Fund itself is €1.8 billion in 2016. This is what it’s made up of.

  • Local Property Tax: €437.6 million
  • Motor Tax: €1.075 billion
  • Exchequer payment: €286.86 million

It is crucial to understand that the local property tax and motor tax are not ring-fenced for Irish Water. They are simply pooled in the Local Government Fund, and then €479 million of that is taken out and given to the utility.

However, of the €286.86 million Exchequer payment, a certain amount is ear-marked for Irish Water.

In response to our queries, Brendan Ogle argued (based on 2015 figures) that:

  • 80% of motor tax receipts come from households (as opposed to businesses), so €252 million of that goes to Irish Water
  • 100% of the Local Property Tax comes from households. That’s €142 million
  • When those amounts are added to domestic water charges (€271 million), 70% of Irish Water’s funding (€665 out of €958 million) is borne by households.

Screen Shot 2016-06-29 at 4.19.17 PM

There are some problems with this.

  • Firstly, this is not the 78% he claimed on Today with Seán O’Rourke yesterday, and that the Right2Water movement has used previously.
  • Secondly, the calculations he provided did not account for the Exchequer payment that goes into the Local Government Fund.

This is money taken from the state coffers, into which income tax, corporation tax, customs, excise, capital gains tax, etc… has gone, and not exclusively income derived from “households”.

  • Thirdly, his source for the claim regarding 80% of motor tax receipts is this.

However, what that article actually shows is that around 80% of vehicles are private, and not that 80% of motor tax receipts came from private (i.e. non-commercial) vehicles.

Because of the wide range of tax bands and tax rates involved in calculating each motorist’s annual tax, we absolutely cannot say that because 80% of vehicles are private, 80% of motor tax therefore comes from private vehicles.

  • Finally, his argument regarding costs is essentially based on a thought experiment.

Unless government funding is ring-fenced, it cannot be proven that the composition of one pot of money is reflected in transfers from that pot of money to another fund, or department, or agency. It doesn’t work like that.

But let’s go along with it for a moment, anyway.

Thought Experiment

13/03/15 Right 2 Water Cam13/3/2015 Anti Water Charges Campaigns Brendan Ogle (C) addresses a Right 2 Water press conference in March 2015. Source: Leah Farrell/RollingNews.ie

Local Property Tax

The only part of the Local Government Fund that we can say for certain comes exclusively from private households is the Local Property Tax, as Ogle pointed out.

Let’s imagine, in theory (because this is absolutely not how it works in reality), that because 24.3% of the Local Government Fund is made up of Local Property Tax, 24.3% of the €479 million taken from that pot and given to Irish Water, comes directly from the Local Property Tax.

That’s €116.5 million. Add that to €274 million in domestic water charges, and you get €390.5 million of Irish Water’s funding (39%) coming from households.

Motor Tax

It is true that there are significantly more private vehicles than commercial vehicles in Ireland, and notwithstanding the diversity in tax rates, the bulk of motor tax is likely to come from private vehicles.

But we don’t know how much. And in any case, there isn’t a simple analogy between domestic/non-domestic water use and private/commercial motor tax.

Exchequer payment

It is also true that income tax makes up a greater proportion of public revenue than corporation tax and other business-related levies.

So – in theory – a greater proportion of that €286.86 million Exchequer payment in the Local Government Fund will come from households.

But only around 27% of the Local Government Fund itself (€479 million out of €1.8 million) goes to Irish Water.

So the absolute value of those theoretical contributions by private residents are progressively minimised as they get transferred into the fund, and from there to Irish Water.

In theory, it could be argued that households bear the cost of at least 39% of Irish Water’s funding, and probably significantly more than that.

In reality, it doesn’t work like that. So the claim of 78% or even 70% is notional, and cannot be proven.

That’s not to say it doesn’t have any merit or rhetorical value, but it simply cannot be proven as fact.

Conclusion

As regards costs, all we can say with certainty is that Irish Water’s funding model provides that households pay 54% of water charges while businesses pay 46%.

Anything beyond that is Unproven.

And the best data available to us indicates that households use around 60% of water, while business and agriculture uses around 40%.

The claim that 90% of water usage is non-domestic, based on figures that don’t relate to Ireland, is therefore FALSE.

And as a whole, we rate the claim Mostly FALSE.

Send your FactCheck requests to factcheck@thejournal.ie

Correction: Due to a transcription error, this article previously incorrectly stated that Brendan Ogle had claimed on Today with Seán O’Rourke that “98% of water in this country is used by big business and agriculture”. It was 90%. 

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About the author:

Dan MacGuill

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