Irish Water needs its own source of income

Whether Irish Water and/or water charges are abolished by any incoming administration will not make one bit of difference to the fact that the Republic has a clapped-out water and sewage system which is going to take many years, and billions of euro, to put right.

There are a number of obvious and very good reasons for establishing a water utility company to run a service that is equal in importance to, if not of greater importance, than our health service.

A principal reason is the need to create a system that can have an income stream that is independent of Government. As Geoff Aitkenhead, asset management director with the publicly owned Scottish Water told The Irish Times last year, in the competition for scarce public funds, and public funds are always scarce, hospitals and schools will always come first.

The political advantage involved in opting to spend money on a new school or hospital wing, rather than on repairing old pipes or sewage facilities, means such infrastructure tends to be ignored. The result is the clapped out pipes and facilities that exist in this jurisdiction, where raw sewage is still piped into Cork harbour.

Another reason you don’t want Government allocating money to a water utility, is that it makes it near impossible to do multi-year investment planning.

Northern Ireland Water, which is dependant on grants from central funds, spent all of 2015 wondering when it would get approval for its 2016 budget. The efficiency losses involved in not being able to make medium-term plans are huge. Right through the bust, the ESB spend on its infrastructure remained steady, while spending on roads contracted.

Paying bills

As matters stand, Ireland has to carry the debts of

Irish Water

on its books, but progress on the percentage of customers that are paying their bills, and reductions to the water conservation grant introduced by the outgoing Government, could alter that.

Abolishing charges will mean it is very unlikely Irish Water will get the necessary approval from Eurostat.

When it is taken into account that the planned capital spend on trying to repair the Irish water and sewage system over the coming years is to rise to approximately €800 million annually, this issue will have a real impact on whether whoever gets into government will have any of the so-called “fiscal space” so regularly mentioned to us during the election campaign.

Alternatively, an Irish Water that passes the Eurostat test would, everything else being equal, mean hundreds of millions of euro per annum becoming available to pay down debt, pay for public services, or lower the tax burden. Of course there is another way to avoid having investment on underground sewers interfere with promises made during the election; defer the investment.

It is the attraction of this option that has led to the establishment of water utilities across Europe. There are brick sewage tunnels in Dublin that have not been repaired in 50 years and are in danger of collapse.

The Vartry water scheme, which services 200,000 people in south Dublin, was built when Otto von Bismarck was chancellor of Germany. It too is in serious danger of collapse.

Last year Colin Skellett, of privately owned Wessex Water, England's longest-serving chief executive of a water utility, told The Irish Times that one of his first jobs when he started his career in the 1970s, was putting chlorine into the river Avon in Bristol in the summer, to combat the smell from the sewage. "It was horrible, really horrible. Now you can fish in it."

Optional metering

Wessex Water has an optional metering system, and Scottish Water doesn’t meter water use, but all British water utilities get their funding directly from a water charge on people’s homes.

The introduction of water utility companies, to replace local authority responsibilities, has transformed the quality of the water and sewage services in England, Scotland, Northern Ireland, and Wales.

“It doesn’t matter whether it is public or private funding,” Skellett said. “What is key is that the investment happens, and it has to happen consistently.”

The biggest ever contribution to health in the UK, he said, was not the NHS; it was sewers. But water services need sufficient, ongoing investment, and the best way to ensure that occurs, international experience indicates, is through a water utility that has its own revenue stream.