In 2012, public expenditure on water in Ireland was €1.5bn. This money is being spent on a system that does not work.
The recent debate about water charges fails to comprehend the most important point of this matter — it is not about paying for water; it is about paying for the infrastructure to deliver clean water and treat waste water.
Over the past 10 years, successive governments have spent €18bn on water. Of this, only 10% was to pay for the actual provision of water to households and businesses. An emphasis on conservation can only save money on this small portion of the expenditure. The other 90% is not affected by the amount of water we use.
It costs about twice as much to manage and treat waste water and sewage as it does to provide clean water. A further 30% of water expenditure over the past decade is consumed by staff costs. The remaining 40% was devoted to investment in the water infrastructure and this is the most important.
The most significant austerity measure introduced in relation to water is not the botched introduction of domestic water charges – it has been the slashing of investment in our water infrastructure. Since 2008, capital spending on water has been cut by over 60%.
In 2008, the Government provided €1bn for investment in the public water system. The same year, ESB provided €1bn for investment in the electricity system. In 2012, ESB’s capital expenditure was close to €800m, while public capital expenditure on water fell to just €375m.
As a semi-state company, the ESB could leverage its revenues to borrow money to fund its investment. As a commercial enterprise, the ESB’s management can take a long-run perspective.
On the other hand, expenditure on water was part of general government expenditure and the huge cuts to public investment in water were introduced to meet short-term deficit targets.
Huge expenditure is needed to bring our water network up to scratch but it is not clear where the money will come from. The Government remains under pressure to reduce the deficit and the size of the public debt limits the capacity to borrow.
A public utility can raise the funds and its management can look beyond short-termism or the election cycle. Investment in water and sewage infrastructure does not have political attractions. It is disruptive, underground, and offers little chance of ribbon-cutting.
Although they have been on the agenda for years, water charges were rushed in by the current Government because they wanted to get them in the rear-view mirror well before the 2016 election.
The charges were poorly thought out, with politically motivated addendums such as allowances which required PPS numbers to be administrated correctly.
If politicians wanted to compensate people for the introduction of water charges, it should have been done through the existing tax and transfer system. This would have been possible in last month’s budget, which had a €1bn package of tax cuts and expenditure gains but a lack of joined-up thinking resulted in a failure to get a coherent message across.
Now we have a further complication with the €100 water conservation grant. This is just further pointless administration.
The Government wants to cap water charges at €160 per household but, because Irish Water must get more than half of its revenue from private sources, households will actually pay €260 to Irish Water and receive €100 back from the Department of Social Protection.
The Government met major difficulties a few years ago following the introduction of the €100 household charge; now they are giving €100 to households to try and solve the mess they made of water charges.
To avoid been deemed as a subsidy to Irish Water, the €100 will be paid to all households. So instead of collecting money off those on the public system, we now have reached a point where we are subsidising those on private water schemes.
One of the justifications given for the introduction of water charges is the apparent need to conserve water. Conserving water is helpful but it is not like we are going to run out of it. It is better management of the plentiful supply we have that we need.
Better management can be achieved by metering but the benefit of this will be in identifying leaks and unreasonable usage rather than in getting typical households to control their usage. Universal metering is unlikely to being significant benefits.
The introduction of metering is to link charges with usage of water, but we must have a utility that can adequately fund the 90% of expenditure that is on top of the cost of the actual water.
Seamus Coffey is a lecturer in economics at UCC
Only 10% of spending goes on providing water to consumers, says Seamus Coffey
. Saving water cannot fund the huge infrastructure spending that is required
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