Commission concerned about water charge reductions

Report expresses fears that cuts create ‘uncertainty’ over Irish Water’s finances

The European Commission is critical of the significant changes made to the water charging structure introduced by Minister for the Environment Alan Kelly.    Photograph: Cyril Byrne

The European Commission is critical of the significant changes made to the water charging structure introduced by Minister for the Environment Alan Kelly. Photograph: Cyril Byrne

 

The European Commission has expressed concern that sharp reductions in water charges have created “uncertainty” over Irish Water’s finances remaining off the Government balance sheet.

The commission’s latest assessment of the State’s fiscal and reform policies since exiting the bailout is generally positive about how the Government has performed. But it is critical of the significant changes to the water charging structure introduced by Minister for the Environment Alan Kelly last November.

If Irish Water fails the market test set by Eurostat, it could mean the budget deficit would be increased by about 0.3 per cent of gross domestic product.

The confidential report, which has been seen by The Irish Times, was prepared by staff in the commission’s directorate-general for economic and financial affairs.

It is to be laid before the Oireachtas at the end of the month.

It concludes that the reductions, which will see a family of two adults and two children paying a net yearly charge of €160, may result in Irish Water’s ability to borrow on the markets being diminished.

It argues that incentives to conserve water as a result of metering will be weaker because households will have to be particularly parsimonious with their water usage to achieve any savings.

Independence

Its most serious criticism concerns the Eurostat rules that determine if Irish Water can be considered a stand-alone entity for the purpose of general government accounts.

While noting that the Government appears fully confident Irish Water will pass the market test, the report states the reduced charges had “increased uncertainty surrounding Eurostat’s decision”, which will be made in April.

Doubts

Politically, however, the Government will take comfort from another criticism of the commission – that the price reductions mean water charges in Ireland will also be among the lowest in Europe.