Irish Water: Utility a persistent unmitigated disaster

Irish Water has run from one controversy to another but now things have got a whole lot worse, writes political reporter Juno McEnroe.




“Give it time — give it a fair hearing,” appealed Environment Minister Alan Kelly last November as scandal after scandal surrounded the Irish Water project.

But the Coalition have had their chance.

Now, EU authorities and the public have decided the whole water charge system is at sea. The confusion and criticism overshadowing the bonus-driven company; the rushed and muddled charging scheme; and the secret setting up of Irish Water has just got a whole lot worse for Fine Gael and Labour. The country’s debt is now worse off and mainly because the project failed to gain the trust of the majority of people.

Sinn Féin leader Gerry Adams commenting on Eurostat’s ruling on Irish Water on the plinth at Leinster House.

Eurostat’s ruling that Irish Water has failed its test on being independent means at least €500m will be added to the national debt. Essentially, Irish Water needed that independent status so it could remain off the State’s balance sheet and borrow money from the markets. That borrowing potential may be affected by the EU ruling.

The troika bailout deal in 2010 committed to introducing water charges, a project continued when Fine Gael and Labour came to power the following year.

While then environment minister Phil Hogan said Irish Water was the most important state utility to be set up since the ESB, the project was plagued by scandals from the outset, including legislation being rushed through the Dáil in four hours and a revelation that more than €50m was spent on consultants’ fees.

The Coalition insisted Irish Water was necessary and that it was good value for money. It is hard to forget Mr Hogan’s infamous claim back in January 2014, before he later hightailed it to Brussels for a rewarding position as EU agriculture commissioner: “You can’t make an omelette without breaking eggs. And we have here a new utility at a cost of €180m, which if anybody would look internationally at what has been done in setting up a company from scratch, will show that this particular company is not only essential, giving good value for money, it is going to give an opportunity to get money on the open markets for more capital investment in water that we badly need.”

There was talk of reducing water pressure in households if they did not pay; and an environmental incentive where those who used less paid less. But later, amid growing public protest with 100,000-plus people taking to Dublin’s streets at one stage, there was a total U-turn on the charging scheme.

After a change in Labour’s leadership following bruising local and European elections, the newly-crowned environment minister capped and reduced the charging system, simplifying it and reducing the political risk for the Government. This mainly involved giving all households a €100 grant towards water bills.

Everyone was told there was no alternative to water charges. The other option would have been to increase income taxes, Taoiseach Enda Kenny declared.

When introducing the changed system Mr Kelly pleaded with the Dáil and the people to give it time. The deputy Labour leader said: “Of course we have made mistakes as a Government. While we have made mistakes, setting up Irish Water was not one of them. I ask the people to give this package a fair hearing.”

But the Coalition’s gamble and redrafted water charge scheme has not paid off. The plan has failed. This is especially evident after figures released this month showed just 46% of households had paid their bills. Now, Eurostat has also given the utility the thumbs down. And the statistics agency’s report yesterday pulls no punches.

Now, Irish Water is not viewed as being a separate utility like the ESB or Bord Gáis. Instead, its cost will be factored into public spending for the foreseeable future.

This latest Irish Water controversy may not immediately impact on costs for households. Instead though, it is the political cost that is more significant, with Finance Minister Michael Noonan admitting yesterday that it was “embarrassing”.

The Eurostat decision won’t affect budget 2016, he said. Nonetheless, keeping Irish Water on the State books may reduce any scope in future years for spending unless the next government can reverse that position.

Of course, this leads to the next question. How can they? The only obvious way of increasing the income stream is to hike up water bills, reduce grants going to homes or hope that more households eventually pay up. Abolishing Irish Water in the near future is not an option. It remains to be seen what solutions the Coalition will offer for the scandal-ridden company when the election is eventually called.

Conor Murphy former minister for regional development in the North of Ireland, Finance spokesperson Pearse Doherty TD and Sinn Fein leader Gerry Adams TD comment the Eurostat ruling on Irish Water on the plinth at Leinster House. 

 

A trickle of quotes on Irish Water saga

“They wouldn’t need to set up a company if I was going to be involved in the day-to-day running of the company. I don’t micro-manage. I’m actually an ordinary human being like most people” — the then environment minister Phil Hogan on his failure to control the utility after it emerged some €90m was spent on consultants.

“You can’t make an omelette without breaking eggs” — Mr Hogan on the ensuing controversy.

“Water pressure will be turned down to a trickle for those who don’t pay” — Mr Hogan on penalties.

“I want my legacy to be one of achievement and not destruction. While we made mistakes, setting up Irish Water was not one of them.” — Environment Minister Alan Kelly after he tried to clean up Phil Hogan’s mess.

“Only 43% of the expected customer base of 1.5m people have paid up. If that rate of payment continues, the Government will take in approximately €120m, while it will have paid out approximately €130m in the water conservation grant, and another €25m will be due in interest repayments on the loans taken out to pay for the installation of water meters. On that basis, the Government will lose at least €35m in revenue as a result of the imposition of the tax. It is probably the first Government in history to lose money having introduced a tax” — FF leader Micheál Martin

 

How wrong they were...

by Shaun Connolly

The Eurostat ruling on Irish Water’s status would merely be a “confirmation” of the Government’s thinking, then environment minister Phil Hogan told the Dáil.

His successor, Alan Kelly, was “absolutely” sure the utility would pass all EU tests on the matter. And Taoiseach Enda Kenny was “happy” Irish Water had been designed in the best possible way to please Eurostat. They were wrong.

Tánaiste Joan Burton insisted there would be no problem with Eurostat, telling fellow TDs: “We should more than comfortably pass the test. I am satisfied that we will actually pass the test.”

Failing to spot the straw in the wind which would herald the coming storm, Mr Kenny had harsh words for the European Commission in March when one of its reports cast doubt on

Irish Water’s off-sheet acceptability. Insisting the commission had better things to do with its time, he told the Dáil: “I regard the commission’s intervention here as being unhelpful, it is not a matter for the European Commission.”

Mr Kelly was unshakable in his belief that the utility would sail through the EU test, saying: “The Government remains absolutely confident that Irish Water will pass the market corporation test.”

It was a show of arrogance he seemed to inherit from Mr Hogan, who in May of last year insisted it was only a matter of “confirmation” as he told TDs: “It is proposed that from its inception, Irish Water should be classified as a Market Corporation under Eurostat rules, and as a result, will not, other that in relation to Government operating subvention, be included in the calculation of the general government balance.”

The Taoiseach was rock solid in his faith Eurostat would be impressed by the way the Coalition had designed the utility, telling the Dáil: “The Government is happy that Eurostat’s assessment, which is completely independent, will be met by the way Irish Water has been set up and its structure. We are happy that it will pass the test.”

Mr Kenny is not so happy now, and neither is Eurostat.

 


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