Government awaits Irish Water ruling

The Government may be forced to seek additional funding or add the costs of setting up Irish Water to the national debt if EU auditors rule the State cannot purchase equity from itself.

As part of the set-up costs of Irish Water, €635m was earmarked in the Government book of estimates for the Water and Sewage Services Programme.

In response to a parliamentary question from Sinn Féin’s Pearse Doherty, Environment Minister Phil Hogan confirmed that up to a third of the money designated in the programme was planned as an investment in Irish Water.

“Of this amount, €240m is proposed as an equity investment by the Minister for Finance, and the balance will be raised through borrowing subject to my consent and that of the Minister for Communications, Energy and Natural Resources, the Minister for Finance and the Minister for Public Expenditure and Reform,” Mr Hogan said.

Subsequent parliamentary questions to Finance Minister Michael Noonan revealed that the €240m would come from the central taxpayer fund and the Government was hoping to keep the almost quarter of a billioneuro off of the national debt by taking a percentage of Irish Water in exchange for the funding.

“It is proposed that there will be a €240 million equity investment from the Central Fund which, subject to Eurostat confirmation, would not impact the General Government Deficit as this amount would be treated as an acquisition of equity rather than a capital transfer.

“The investment will be used to primarily fund the core capital expenditure programme of Irish Water,” Mr Noonan said.

Although Irish Water is 100% owned by the State, a Department of Finance spokesperson said the Government would receive further shares in the company in return for this investment.

“Irish Water has been set up as a State-owned... Further shares in Irish Water will be issued to the Minister for Finance and the Minister for Environment, Community and Local Government pursuant to this investment.”

The spokesperson added: “It is important to note that this is not additional funding for the water sector, this is a reclassification of expected 2014 Government funding for capital investment in the Water sector already provided for in the Medium Term Exchequer Framework for Infrastructure and Capital Investment.”

However the decision whether or not the exchange of equity is acceptable rests with the European Commission’s statistical service, Eurostat.

The body previously accepted the Government’s argument that the €54bn costs of fundingNAMA should not be part of Ireland’s Government debt, agreeing to treat it as an off the balance sheet financial instrument known as a Special Purpose Vehicle.

A Department of Finance spokesperson said it expected Eurostat to allow them to keep the expenditure off of the government debt, but if they didn’t they would need to find another way to fund it.

“In the event that such an injection of capital is not confirmed as equity, it would be a matter for Government and Irish Water to consider alternative sources of funding, and for Government to consider the impact on the general government deficit,” the spokesperson said.