Tuesday 10 December 2019

One way or another, we need to invest in our water system before pipes rot in the ground

In Dundalk one young protestor ran the gauntlet against water charges. Photo: Aidan Stewart
In Dundalk one young protestor ran the gauntlet against water charges. Photo: Aidan Stewart

Stephen Kinsella

Taoiseach Enda Kenny has threatened to increase the top rate of income tax by 4pc. Much of the country will now presumably breathe a sigh of relief, as the majority of our population of 4.58 million people, who survive on lower or fixed incomes, will not bear this cost at all.

I'm being facetious of course.

Irish society cares deeply about the provision of water and the Taoiseach's statements only underline how important Irish Water is to next year's Budget calculations - without Irish Water in the frame, the Government has to come up with funds to meet our Troika-mandated targets.

There is no real division between Irish Water and the Government when it comes to the cold, hard cash required to run the state.

The taxpayer already spends around €1.3bn from general taxation on providing water services through 34 regional bodies. This inefficient set-up is not enough to fix a leaky and under-provisioned water treatment system. Today, citizens have to put up with boil water notices and treated water shortages are forecast to become more common in the future. If the amount invested in the system doesn't go up, these problems will surely get worse as our population increases and ages.

In Ireland, you start paying the higher rate of income tax after you earn more than €33,000. As a single person, you'll pay about 19pc of your gross income at this level.

The top 22pc pay 80pc of the income tax but have average incomes of over €91,000. The remaining 78pc, over 1.6 million singles/couples, have average incomes of about €22,000.

The Taoiseach is betting those who are already paying most of the tax will baulk at paying more in general taxation to fund the water usage of everyone else in our society.

As in previous contentious debates, and particularly when it comes to taxation, the standard strategy is to increase fear in order to subdue anger in the population. I don't think that will work in the case of Irish Water. Things have just gone too far.

In this column last week I outlined the logic for setting up a structure like Irish Water.

From the Government's point of view, you get to increase investment in the water network now by borrowing against future tax revenue, and you keep that increased borrowing off the State's books.

In a stroke - no pun intended - you get increased investment, increased conservation at the level of the user because of metering, a broadening of the tax base and a rationalisation of the 34 bodies currently doing the job. Citizens - not just taxpayers - get access to better quality water and the system moves towards international norms.

Another solution to the problem of underinvestment in the system would be a tax on water to finance increased investment in the network. An introductory flat tax collected by the Revenue Commissioners on water would have done the trick to ease households into the payment process, but this would have been very regressive, harming poorer households much more than richer ones. A tiered payment process could also have been designed.

Irish Water was flawed in its execution from the start. It is now obvious the design of the service is poor, despite the millions spent on consultants. The communications are a disaster, despite an incredibly well paid management team. The funding model - straight from Ervia - for staff is completely at odds with what the public expects after seven years of austerity.

There is no doubt Irish Water is a creature of the Government. These are public servants in all but name. Revelations over the set-up have stoked fears over privatisation, information security, equity of access and service levels, as well as sky-high operating costs. The creeping corporatism of a semi-state that is inserting itself between your right to water as a citizen and treating you as a customer jars with the obvious need to provide a high-quality service for everyone.

This tension manifests itself in the attempt to change the conception of the water consumer to that of a water customer because of the universality required for a service like water provision. If I can't pay for my car, the bank can repossess it. But I can't have my water cut off entirely. Water is a human right. Much of the anger Irish Water generates comes from this tension.

None of this mix of bad design and a sheer accumulation of mostly avoidable cock-ups changes the fact that money needs to be found to fund the provision of water properly. At the heart of the matter we need a water tax. Remember, we already pay €1.3bn in tax for this purpose.

There are five generally desirable characteristics of any tax. First, that it induces economic efficiency; second that it acts in a corrective fashion; third that it is flexible; fourth that the tax is associated with political responsibility; and fifth, that it is fair. When a tax is borne by consumers, they do act to minimise their experience of it - think of the plastic bag tax, which corrected a socially harmful problem pretty quickly by getting people to realise how many bags they were using and cut down on that usage. The plastic bag tax is flexible, in that it could be increased, decreased, or abolished, and it is associated with the Department of the Environment and fair, because everybody who buys a bag pays it. Those who don't use the bags don't pay anything. It is obvious the set-up of Irish Water is not efficient - it is over staffed, for a start, and costs per litre look much higher than international averages. It is an effort at avoiding political responsibility and a majority of people believe its unfair.

The way forward is pretty clear to me - the management of Irish Water needs to resign. They have proven they are not fit for the job. The roll-out of metered charging needs to be put on pause until the design of the service is fit for purpose under new leadership, with clarity that the water tax is being collected through the Revenue. The fears over privatisation and information security must be quelled, through further legislation if necessary.

My firm view is that the problem of underinvestment in water services needs to be addressed. This is a long term challenge for our society. Ignoring the problem just because all known cures are worse than the disease will not stop our network of water pipes from rotting and eventually collapsing under the increased demands of a growing society.

Irish Independent

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