Saturday 22 October 2016

Daniel McConnell: We hate it, but embattled utility is here to stay

Published 23/08/2015 | 02:30

WATER WORKS: The Minister of Environment, Alan Kelly, left and John Tierney, managing director of Irish Water
WATER WORKS: The Minister of Environment, Alan Kelly, left and John Tierney, managing director of Irish Water

To those who want to get rid of Irish Water — and sure why wouldn’t you, given how disastrous it has been — simply find the guts of €1bn and away you go.

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That is the cost of how much it would take to eradicate the much-maligned super quango from existence.

As fresh controversy engulfed Irish Water last week over the €100 conservation grant and the ‘cold-calling’ of customers who had failed to pay their bills, the case for doing away with the utility has strengthened.

Most of the opposition parties and groupings have said they want to do just that.

The only problem is, none of them to date has come up with a credible alternative on how to find the €1bn odd cost to unwind it, or how to secure the future of the water network, which is in a ruinous state.

But to explore this issue, let’s go back to the beginning. Why does Irish Water exist?

In 2009, Fine Gael first proposed the idea of Irish Water as part of its New Era strategy in recognition of the decades of mismanagement of the water network.

Latest figures show us that 49pc of the water supply — half of all water refined for public consumption — is lost through leaks.

Then as part of the Troika bailout negotiations in late 2010, Fianna Fail, in the dying days of its administration, committed to water charges of up to €400.

Water charges formed part of the Fine Gael manifesto and were criticised by the Labour Party during the election campaign.

But in April 2011, the Government announced that under the auspices of Bord Gais, Irish Water was to be established. But it was not until last year that the public began to see the presence of Irish Water as metering began.

And since then we have endured 18 months of controversy, confusion, U-turns, protest marches, attacks on politicians, and now a failure of a majority of people to pay their bills.

Irish Water has a major confidence problem and is now on par with the HSE for how much it is despised and how dysfunctional it is.

But are the calls to abolish Irish Water credible?

The case for the prosecution is that the omnishambles that is Irish Water is a cost too high for the Irish people. Talk of €50m spent on consultants by John Tierney, the CEO of the utility, ignited a political furore, as did revelations that Irish Water staff are entitled to “bonuses”.

Repeated government interference and changes to charging structures and rates throughout last year only served to undermine confidence further and saw Fine Gael and Labour take a kicking at the local and European elections.

The departure of Phil Hogan to Europe did little to quell the maelstrom of fury, and his successor as Environment Minister Alan Kelly was forced to scrap the original pricing plan when Irish Water dominated what was meant to be a good news cycle, immediately after the first expansionary budget in seven years.

Mr Kelly simplified the rate structure, and said the conservation grant would not only be paid to Irish Water customers but to thousands of people who have their own water supply.

Then, in July, in a major blow to the credibility of  Irish Water, it emerged that just 43pc of registered customers had actually paid their first bill.

And then in a further embarrassment for the Government and Irish Water, Eurostat ruled that Irish Water had not passed its market test and that its debt must be included on the Government’s balance sheet.

One of the major arguments given by the Government was that Irish Water would operate off balance sheet, and be able to borrow without affecting the national debt figures.

The argument is that so much controversy has rendered Irish Water untenable.

Public confidence is low, political confidence in it is low and on its current numbers, there are significant question marks over its viability.

But what about the case for the defence. Why should we keep Irish Water?

Firstly, given how far down the track we are, any move to untangle Irish Water is legally fraught and highly complex.

Why is this?

Irish Water has worked amid significant difficulty to put order on a water network that is on the verge of collapse.

In the control of 34 separate county councils, the job has been on a par with Nama’s line-by-line evaluation of assets and loans where very poor documentation existed.

Sources in Irish Water have said that the disparity in the quality of information from various councils about their pipe network was shocking.

More than €11bn worth of assets has been transferred to Irish Water and those assets are now under the control of one centralised national network.

To unwind Irish Water, all that hard work would have to be undone and reversed.

All of which is being monitored, assessed and managed by a state-of-the-art IT system which has required a major investment.

To scrap Irish Water and return the network back to the councils, that €50m spend would have to be written off.

Irish Water believes that at least €5.5bn is needed between now and 2021 to upgrade the network. By and large, the opposition agrees.

Apart from Renua, all favour abolishing domestic charges, at least for the present. So how will that money be sourced?

If you abolish Irish Water, you would have to also meet the redundancies of hundreds of people who have contracts of employment and would need to be compensated.

Who would pay for that? The issue of executive salaries, the administrative costs of billing, legal advice secured and payments to contractors are also identified as costs which could be stripped out.

But if Irish Water is abolished, would many of these costs not arise anyway? Is there no requirement for management? Would there be no need for planning, legal and other consultants and contractors?

Now, Fianna Fail has called for the quango to be abolished, and claims to think that the cost of dismantling the utility is €172m. Fianna Fáil suggests that Irish Water be replaced by a National Water Infrastructure Company with a “drastically slimmed-down staff” of 100.

Sinn Féin has said it will scrap both Irish Water and water charges, insisting it would cost as little as €141m to do so and that the provision of water would be funded through measures such as a third rate of tax.

The other smaller groupings such as Renua and the Social Democrats have vague desires to change Irish Water but offer little detail on how to do it.

Public Expenditure and Reform Minister Brendan Howlin has claimed that the abolition of Irish Water would cost €900m.

“They’ve both said they will abolish Irish Water, so the consequences of that would be that they would have to find €900m,” Mr Howlin said.

He said that scrapping the controversial utility would involve the loss of €300m of income in “cash terms” as well as “just under €600m in capital” which, he said, would have to be accounted for on the government balance sheet. So, for them to abolish Irish Water, there is a net cost of €900m.

Sources this weekend have put that figure closer to €1bn when all the legal complications are accounted for.

Ultimately, we might not like Irish Water, but there is simply no credible alternative to it.

Sunday Independent

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