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Opinion: The ripple effect of commodifying water – from Dublin to Detroit

Looking at how water charges have been implemented elsewhere allows us to glimpse what their likely effect will be in Ireland… and it’s not pretty.

Cillian Doyle

BY NOW MOST people in Ireland have probably received though their letterbox Irish Water’s ‘Application Guide’ and are currently weighing up their options. But before blindly ‘applying’ to have your household charged for water for a second time (we already pay for water through central taxation) I’d like you to consider the effect of water charges in an international context – as an understanding of how water charges have been introduced and implemented elsewhere allows us to glimpse what their likely effect will be here. It doesn’t make for pleasant reading.

Foreign waters

Arguably the most fitting example and one that’s been making global news over the last few months is the case of Detroit. Detroit, with a population size similar enough to our own, shares a number of qualities with Ireland that makes for a fitting comparison. Its economy has been ravaged by the global financial crisis; it has had harsh levels of austerity rammed down its throat at the behest of the financial sector; and it has both high levels of unemployment and outward migration. Sound familiar?

In June Detroit’s municipal water board took the decision to start cutting off the water of residents who could not afford to pay their water bills. At the time of writing, almost 20,000 households have lost complete access to water in their homes. This means no water for bathing, cooking or cleaning or even flushing the toilet. The UN was quick to condemn these actions as a “violation of the human right to water and other international human rights”.

Since Detroit introduced water charges almost a decade ago prices have shot up by a massive 120%, making water unaffordable for many. This is against the backdrop of the state teetering on the brink of bankruptcy with over 44% of residents living below the poverty line. But wait – Detroit’s politicians have come up with a (not so) cunning plan to fix the problem. Yes, the big idea is to privatise one of the most vital public goods in any economy, the water system.

As to be expected, they’re pushing the same old lines about the private sector doing things more efficiently and cost effectively – you know, the usual stuff. But whenever you hear politicians assert anything with great confidence, it’s always a good place to start by asking about the facts. So let’s take a look at just how cost effective privatised water systems have actually been.

Come hell or high(priced) water

Both the UN and the World Bank have recognised the difficulty in running a private water system profitably while at the same time delivering an equitable and affordable service for citizens. In France prices rose by 29% after privatisation, while in Britain it has risen over 64% in the last ten years alone. In Bolivia the average price of water quadrupled after privatisation, which led to much civil unrest and the so called ‘Water Wars’ in Cochabamba, whilst in Uruguay the privatisation experience proved so unpopular that it was outlawed in 2004 with free and fair access to water becoming enshrined as a constitutional right.

Private water providers are rarely (if ever) as cost effective as public utilities – as their mandate to return a profit to their shareholders, and the need advertise and market themselves along with the high salaries of executives, means costs end up being higher and correspondingly prices take off. This means lower income groups often cannot afford this most basic necessity and run the risk of being cut off completely. It is for such reasons that the good people of Paris rejected their politicians’ decision to privatise the country’s water and took water provision back into public hands.

After the first year back in public ownership alone they had managed to save €35 million and make the rates affordable for all residents. How did they do this? Well, a correctly funded public system puts the revenue generated from rates back into that system, instead of having it leak out to the company shareholders and become drained by the high salaries of the executives. It also allows for democratic decisions to be made on the price of rates, something a private company would in no way be constrained by.

H2(whoa) – it’s happening again!

So, where does Ireland fit in all of this? The case of Detroit and the others I mentioned are a window into our future. The creation of the semi-state body Irish Water is simply the thin end of the wedge of privatisation – we cannot fool ourselves into thinking any different. Sometime within the next few years the Competition Authority will come knocking and, armed with its competition legislation, will argue that Irish Water has an unfair advantage in the market and must be opened up to private competitors.

This is nothing particularly new or novel. We’ve already been through this scenario with refuse collection. Remember, it wasn’t so long ago that it was the councils that used to collect your bins. But now we have the likes of Panda, Greenstar, Oxigen and Greyhound doing the job. We had the same lines fed to us back then that refuse collection wouldn’t be privatised, yet that’s just what happened.

When the Competition Authority, backed by the EU, told us that under European competition legislation we’d have to open it up to private operators the Government said that their hands were tied, but not to worry because the private sector would do it more cheaply anyway. I can’t recall the last time I saw – or ever having seen – average waste disposal charges fall. In fact, they only seem to ever go one way: skyward. And as for all the waivers they used to tempt people in, well it wasn’t long before they disappeared.

So what has been the result of privatising our waste disposal service and what implications could this have for the potential privatisation of our water? Well, to keep it short and sweet, we can look forward to a more expensive and undemocratic service with less accountability – as the case of the Greyhound workers readily shows.

Leaky pipes and shaky logic

Enda Kenny’s claim that the creation of Irish Water is about conservation and not the fire sale of a hugely important state asset doesn’t even pass the laugh test. If there was any interest in conservation on the part of the Government they’d be encouraging the harvesting of rainwater (god knows we get enough of it), they’d be changing building regulations to ensure a dual flush system, or they’d be demanding the separation of grey water from normal water for things like dish washers, washing machines and toilet usage. But, most of all, they’d be fixing the Victorian era pipe system which has more leaks than a hedgehog’s raincoat!

But, you see, to fix a pipe system where an estimated 50% of the water leaks out into the earth would cost money and why would you want to spend millions fixing the pipes of a system that you’d planned to sell off anyway? In fact, when you think about it, it serves the Government’s interests that we have such wastage because the leaks will overestimate household usage meaning even higher bills but also – and here’s the key part – higher potential profits for those companies hoping to get in on the action.

However, once the bills start rolling in January the issue of water charges may well prove to be the one that brings down this Government – because, as the old proverb goes, ‘small leaks can sink big ships’.

Cillian Doyle is an economist with the People Before Profit Alliance. 

Read: Households with undrinkable water could be in line for a bigger discount

Opinion: Yes, we should pay water charges – but we should also get an improved service

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Cillian Doyle

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