Tuesday 17 September 2019

Fair water charges would stop outpouring of anger

The current Dail will not legislate for water charges, but a future Dail will have to address the issue, writes Colm McCarthy

OUTCRY: Thousands of protesters took part in the anti-water charges rally in Dublin earlier this month Photo: Tony Gavin
OUTCRY: Thousands of protesters took part in the anti-water charges rally in Dublin earlier this month Photo: Tony Gavin

The report of the Oireachtas Joint Committee on the Future Funding of Domestic Water Services was released on Wednesday last. The report declines, up front and openly, to outline any plan for the future financing of the water industry, which is what the committee was asked to do.

Instead the operating shortfall of the water industry and the enormous capital bill for rehabilitation of the system are both to be financed from something called 'general taxation', a bountiful treasure chest nestling undiscovered in the basement of the Department of Finance.

This secret stash contains nothing as boring as ordinary money, which can only be spent once, but is a magic and inexhaustible currency made of premium elastic and capable of postponing political choices forever.

The last government's original plan was to reduce by about half the prospective water bill arising from the scheme announced by the predecessor Fianna Fail/Green administration. The reduction was to be achieved through fixing the annual charge for most households at €260, defrayed to a net €160 via a 'water conservation grant' of €100, coincidentally bringing the net cost to the level of the television licence fee.

The €260 gross figure would have been enough to ensure that annual revenue would appear to cover 50pc of operating costs and to permit the government to pretend that Irish Water was a commercial semi-State company. The 50pc cost-recovery figure was felt to be acceptable to the EU statistical office, Eurostat. This was important since it would have meant that Irish Water's debt could be hidden off the government's balance sheet as if it was a largely self-financing commercial operation, permitting extra government spending while appearing to stay within the EU's fiscal prudence guidelines.

The jockey fell off this unfancied horse, not once but twice. Eurostat declined to go along with it and the free water campaigner Paul Murphy won the Dublin South West by-election in October 2014. All three of the main political parties converted to free water, with Sinn Fein the first domino to fall. This brought down the Fianna Fail domino prior to the February 2016 General Election and Fine Gael has now keeled over to complete the collapse.

The joint committee's report must now be cloaked in some kind of legislative fig-leaf, maintaining the pretence of a charging regime in the hope, apparently vain, of staying inside the requirements of the EU's Water Framework Directive. This was enacted as far back as the year 2000 with Ireland's support, subject to a temporary derogation.

Roughly 8pc of urban households could now end up paying for 'excessive' water use and it is the devout wish of the committee, and presumably of the Government, that the European Commission does not subscribe to the Irish newspapers and will not understand what has happened. Ireland will thus escape, they hope, numerous millions in fines for failure to implement the directive. Should the fines be imposed, this can be blamed on the ever-available Brussels bureaucrats.

The committee has recommended full refunds for those who paid up, which should please several Sinn Fein members who indicated their intention to pay prior to their misadventure in Dublin South West. About two-thirds of the liable public either paid or signed up to do so, and almost one million households coughed up €163m. But the 'water conservation grant' cost €89m, and the intention, apparently, is to make refunds on a net basis. This will be tricky: the €100 grant was paid unconditionally, without any requirement to do any water conservation. Not even a plastic bucket in the back garden. Some people who did not pay the charge, or who had no liability, appear to have helped themselves to the €100 grant, and retrieving this money should be fun to watch.

Irish Water, between operating losses and the bill for overdue capital works, will now be short in excess of €1bn per annum in cash. The committee is anxious to protect this financial gem from the calamity of privatisation, presumed to be an imminent threat.

To this end, it has recommended a referendum to enshrine in the constitution Irish Water's status as a publicly-owned financial albatross. If Oireachtas members are anxious to abdicate legislative responsibility for loss-making State enterprises, there are other candidates losing prodigious amounts of money with no private suitors. Surely Irish Rail is equally deserving? What about the road network, or the Phoenix Park?

The willingness of elected politicians to abdicate by referendum (take a bow, David Cameron) has been a feature of the lurch to populism, in the form of some notion that democracy by plebiscite is inherently superior to the deliberations of elected representatives.

The current Dail contains, and amongst the Right2Water deputies, several vociferous opponents of the 1983 abortion amendment, on the grounds that such matters should not be enshrined in the constitution but should be left to the wisdom of the legislature. Even if the privatisation of Irish Water was going to be feasible in their lifetimes, which looks unlikely, why should the matter be any different?

It is clear that the current Dail will not legislate for water charges but some future Dail will have to address the issue. An important factor in the Right2Water campaign was the perception that the water charge, which might have been acceptable on its own if handled with more political skill, was coming on top of a succession of new tax impositions since 2009.

The correction to the Irish public finances owes more to taxes and charges than it does to expenditure cuts, notably the Universal Social Charge, the increase in VAT, the household property tax and numerous other overt and concealed impositions.

There was an element of 'enough is enough' about the street protests, fuelled also by the entirely accurate perception that the European Central Bank had imposed illegitimate bondholder pay-offs on Irish taxpayers.

But there is an additional annoyance factor. Most people pay most of their taxes without pain-in-the-neck compliance costs.

Excise duty and VAT is collected by retailers, most income tax and USC by employers, so there are no demands from the Government demanding one-off lump-sum payments. But the property tax was new, fighting for space in the letter-box with car tax, NCT renewals, the TV licence fee and now the water bill.

There are two costs to dealing with unwelcome fan mail from the Government, the cash cost and the hassle. The latter is exacerbated by the multiplicity of payment platforms and the codology with PIN numbers. If Aer Lingus and Ryanair made it so hard to pay, they would never fly again.

One of the once-off payments, the TV licence fee, cannot be long for this world. It is becoming uncollectible and recent proposals to extend it to laptops and (large!) smartphones look incapable of implementation.

Perhaps public broadcasting is a genuine candidate for subvention from our good friend general taxation, and when the time comes to scrap it, the opportunity could be taken to build a single platform to collect all of the household-based taxes and charges in a more user-friendly fashion.

Including a fair charging scheme for water.

Sunday Independent

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