Irish Water will get a €660m bailout this year but a decision to suspend water charges could have “big consequences” for funding other services next year, warns Housing Minister Simon Coveney.
His suggestion was backed by Public Expenditure Minister Paschal Donohoe who said funding for Irish Water would compete with other demands such as housing.
The pre-budget cautions put Fine Gael directly at odds with Fianna Fáil, which wants water charges suspended indefinitely. Taoiseach Enda Kenny yesterday accused Fianna Fáil of a “reversal to old-school populism” in insisting water charges not be reintroduced.
Funding for Irish Water is being considered by a commission on water charges, due to report in November.
Mr Coveney said the 2017 position on funding for Irish Water is dependent on what the commission and a follow-up Dáil committee conclude.
It had been planned that the subvention, or bailout, for Irish Water would be €479m. Irish Water estimates its shortfall from water charges to be €181m for this year. This brings the total subvention needed for Irish Water this year to €660m, Mr Coveney told the Oireachtas housing committee.
The €181m shortfall will be plugged by the €110m that was to go to the water conservation grant, a €58m loan to Irish Water, and another €13m still to be found.
Mr Coveney said the €110m from the conservation grant would not be there next year. “Let’s be honest about this, if the Oireachtas decides to do away with water charges, then we still need to progress and deliver on the significant capital expenditure programme that Irish Water needs to deliver on,” he said.
“That will have to come through other revenue raising and presumably general taxation, which then limits our ability to spend in other areas and also undermines the water conservation incentive that comes with having some link between what people pay and how much they use, never mind all the issues around water directives.”
Funding for Irish Water will be discussed when the commission reports and in the context of the budget, the committee was told.
Mr Coveney said: “But the choices we make have consequences, big consequences, because regardless of what way you cut it, we have to invest billions of euros over the next five years in water infrastructure and it has got to be paid for. The only question we have to decide is, do we pay for that through general taxation; do we pay for it through a combination of general taxation and direct charging that tries to incentivise conservation and water management; or do we go back to a previous charging system?”
He added: “There is a big cost if we decide not to have revenue stream coming from water provision to domestic houses. There are big consequences in terms of the flow of money in and out of government.”
Separately, Mr Coveney warned local authorities not to expect the Government to “pick up the tab” if they reduce property taxes next year. Some 16 councils cut rates last year and 11 had done so this year, he said.
The warning on water was also made by Mr Donohoe, when he told a separate committee about budget preparations. Water treatment coming directly from general taxation would “directly compete with other needs” including housing, he said.
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