Water charges failed due to a ‘too much too soon’ approach – economist

Government policy on property tax succeeded where water charges failed because a “too much, too soon” approach was taken to the latter, economist Jim O’Leary has said.

Both were introduced as austerity measures but water charges came much later, and "good ideas can often be perceived as punishments if introduced at the wrong time," Mr O'Leary, senior research fellow at NUI Galway's (NUIG ) Whitaker Institute, has said.

A report by Mr O’Leary published for a conference at NUIG on Thursday says the local property tax was successfully introduced because “its design was infused with a keen awareness of the importance of anticipating implementation challenges”.

“A key moment was the decision to give responsibility for collection and administration to the Revenue Commissioners,” he says.

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By comparison, a “treacherous basis” for policy was adopted in establishing a water utility which could independently borrow to finance a heavy programme of investment in infrastructure, he observed.

Irish Water had to be classified outside the general government sector by passing the so-called "Eurostat test".

Policy choices such as the universal free allowance for water and universal metering were also made “before their implications were properly understood and without the alternatives being rigorously assessed”.

This reflected a “serious disconnect between policy design and implementation”, he added.

“A sense of trying to achieve too much too soon is suggested by the approach to the overall water sector reform programme,” said Mr O’Leary.

“All in all, in examining policy on water, our reading of the evidence is that it was driven by a vision that would have been more appropriate for a seven- to ten-year timeframe than a three- to five-year period,”he said.

Mr O’Leary’s analysis of the history of attempts to introduce water charges observed that only one political party – the Progressive Democrats – had advocated charging for water in the mid 1990s.

When the then Labour Party environment minister Brendan Howlin introduced legislation to allow local authorities to claim 80 per cent of revenues from motor taxation to cover losses from the abolition of water charges, Ms Máirín Quill described the move as an act of "gross environmental vandalism".

Conserve water

Mr O’Leary observes that two critical elements of Progressive Democrat policy – a universal free allowance and universal metering – were accepted by other parties without sufficient analysis.

History might have been different if the Commission of Taxation’s proposals had been listened to in 2009, he says.

Its proposals on property tax were “fairly well adopted”, but its proposals on water charges were ignored.

The commission had recommended an optional system of metering which would give householders an incentive to conserve water and avoid a fixed charge, and also advised a “gentle transition” towards full charges.

It also advised a more targeted approach to affordability, he says.

“At the end of the day, the government decisively lost the battle for the hearts and minds of the people,” he says.

He also observes that the cost of jettisoning water charges, at between €80 and €100 million at the time of suspension, was far less than that of abandoning property charges, yielding around €500 million euro annually.

The 2011 election saw Fine Gael and Fianna Fáil, both of which supported introduction of water charges, win 95 of 166 Dáil seats, but by 2016, Fine Gael and Labour, the only parties to campaign for retention of water charges, secured just 57 out of 158 seats

NUIG Whitaker Institute director Prof Alan Ahearne has described the study as "thorough and compelling".

It is due to be discussed at a conference entitled "How (not) to do public policy" hosted by the institute at NUIG today which will be addressed by a number of speakers, including Policing Authority chair Josephine Feehily, a former chair of the Revenue Commissioners.

Former Tánaiste and Labour Party leader Joan Burton and Green Party leader Eamon Ryan are also participants, with a keynote address by Department of Public Expenditure and Reform secretary-general Robert Watt.