Tuesday, 8 September 2015

Irish Water – How did we get it so wrong?

Some years ago, while staying with friends in Oman, we were taken on a day-long tour in our friends’ SUV. At one point we pulled into a filling station and I was asked by one of our hosts to pay for the petrol. I thought this rather odd but went along with it and was pleasantly surprised to find that the total cost of a full tank was around €8. In fact the reason I was asked to pay was to demonstrate just how cheap petrol was in Oman.

Environmentalists will probably be horrified at this story but the point I am making is that Oman has a government which accepts that its own citizens should be the first to benefit from the country’s natural resources. Contrast that with Ireland where we have a government which sees our most plentiful natural resource as an opportunity to extract more taxes from its people.

Here in Ireland water is a free commodity, it is a plentiful commodity, often we have too much of it. We have as much water today as we had 50 years ago and we will have as much of it in 50 years’ time as we have today. If I go down the road from my house and remove a barrel of water from Lough Corrib no one will complain, no one will accuse me of damaging the environment, no one will say that I am wasting a scarce resource, and no one would dream of charging me for doing so.

If that same barrel of water is delivered to my kitchen sink the Government wants to charge me for processing the water, for delivering the water, for water meters, for software consultants, for PR consultants, for an army of people manning a call centre to deal with queries about meter readings, for debt collectors, for lawyers, for unnecessary advertising on television and radio and in newspapers, for the nationwide distribution of unwanted booklets, for 1,500 Irish Water staff in excess of requirements and for men and women in a Dublin office who know as little about delivering water as I do.

The occupants of this same Dublin office do, however, know how to mislead the public by using phrases such as “the need for conservation”, “scarce resource”, “reducing wastage”,  “identifying leaks” and by always referring to a specific number of millions of litres of water rather than putting it in context by expressing the volume as a percentage.

The end result is that, despite Ireland having the most plentiful supply of water in the EU, those who know about these things claim that we will be asked to pay more per litre than any of our EU counterparts. They also say that, although we are one of the developed world’s wettest countries, we will be the first to have universal domestic water metering.

There are of course some variable costs associated with getting water from Lough Corrib to my house but the cost per household is so low as not to warrant the cost of a collection system.

Of much more significance are the fixed costs relating to the infrastructure required to deliver the water to our homes. These are the costs associated with the dams, pipes, pumping houses, treatment plants and sewage works, costs which have to be met irrespective of how much water is used by each individual house.

Paying for that is somewhat complicated and is worthy of debate. What we have had to date are ill-considered slogans from Government and from those opposed to water charges. Those who do try to introduce logical argument are largely ignored by the media and totally ignored by Fine Gael and Labour politicians.

The following questions need to be considered:
How much should it cost to deliver clean fresh water?
  • In the delivery of water, overheads are optional so we need to know the actual cost of delivering water to each Irish home.
  • As I have already demonstrated, water meters add to the cost of delivering water so I assume they will ultimately be abandoned. Collecting water charges also adds to the cost of water so that needs to be considered.
Where should the money come from? Options are
  • Exchequer funding as with the road infrastructure. Remember there is no relationship between motor tax and road infrastructure investment; there is no metered usage of our roads; and cyclists make use of our roads without being asked to pay for the privilege, or
  • A flat-rate water charge for domestic users.
Is there really any argument for making Irish Water a Semi-State commercial body simply to allow it borrow off balance sheet?
  • The EU imposes limits for Government borrowing for a reason. Attempting to breach these limits by creative accounting is irresponsible and adds to the cost of borrowing. The Government is behaving like a householder maxing out on credit cards, having earlier agreed a house mortgage and car finance with his or her bank manager.
If there is a case for water charges, how should they be collected?
  • I can think of only one cost-free method of collecting a domestic water charge and that method is also the most effective. There will be no additional collection costs if a fixed portion of the current property tax is earmarked for water and sewage.
Will the imposition of water charges adversely affect other Government policies or goals?
  • Water charges will add to the cost of home ownership and so fewer people will be able to purchase. That will put further pressure on the rental sector which in turn will force larger numbers to seek help from the State.
What will happen to traditional water charges?
  • Anyone building a new house is required to contribute towards the cost of services including the delivery of water. This payment should be included in any review of the cost of water delivery. This charge has an even bigger impact on the cost of home ownership.
If water charges are imposed on domestic users, how will they compare to the charges imposed on the commercial sector?
  • At no time during the ongoing debate on water charges has the Government mentioned the contribution made by the commercial sector to the overall cost of delivering water.
  • At no time has the Government revealed the percentage of processed water going to the domestic sector. I thought I had a reliable source when I was told that just 19% of processed water was consumed by domestic users. When questioned, a senior Irish Water executive claimed it was 34%. Even if this higher figure is accurate it is of huge significance in determining the relevance of water meters and in forecasting the potential savings through all conservation measure.
I started by asking “How did we get it so wrong?” and if there is one over-riding answer it is probably the lack of meaningful debate. Other contributing factors include:

  1. Arrogance (although this may be the reason for the lack of debate)
  2. Incompetence
  3. Disconnect between politicians and public servants on the one hand, and the struggling electorate on the other
  4. Lack of expertise among decision makers
  5. Misplaced assumptions (failure to challenge the so called “givens”)
  6. Focusing on what is done elsewhere
  7. Failing to consider issues unique to Ireland
  8. Subservience to EU officials
  9. Obsession with the word “conservation”, particularly by the Green Party who appear to have set the whole debacle in motion

My own view is that, after we have had this debate, Irish Water will be trimmed down and tasked to simply deliver clean water and treat sewage. I am not sure how the Government of the day will decide to cover Irish Water’s costs, but I believe the utility should have no role in collecting water charges from the domestic user.

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