Water meters and all that

Ireland is not Greece. Ireland, for instance, does not have a problem with tax collection. Or does it? There clearly is a problem with collecting the household charge. To my mind, the core issue is that the Department of the Environment — which has limited experience with indirect taxation and none with direct taxation — tries to do something for which it was not set-up to do — and refused to call in the experts. Like all departments, Dept Env was already stretched because of the austerity programme.

The household charge is flat: 100 euro per residence. It is easy to determine who should pay. Is it a residence? Are you the owner? If yes and yes, you should pay 100 euro.

The household charge should, at some point in the future, morph into a property tax. There are two key differences. The property tax will be differentiated: More valuable properties would be taxed more. And the property tax will be much higher than the household charge: somewhere between 500 and 1000 euro per household on average.

If Dept Env struggles with something so simple as a low household charge, how will it cope with a more complicated and much higher property tax?

The next episode of the saga re-emerged in the news today: Water meters (1, 2, 3). Households will / will not pay for the installation of water meters. If so, payments will be up front / distributed over the years. If not, the Dept of Finance / National Pension Reserve Fund will make up the difference, perhaps as a soft / commercial loan to Dept Env / households. Installation will cost at most 300 euro per meter / at least 300 euro per meter / not yet known.

The semi-state that is to implement water meters, Irish Water, was supposed to start in early January. It is now mid April and plans are not yet definite. It is not even known whether Irish Water will be an independent entity or a subsidiary to Bord Gais or Bord an Mona. The National Roads Authority is apparently no longer in the running, and private companies (Veolia, Tesco) were never considered. As perhaps 4,000 county council staff may be transferred to Irish Water, it may want to recruit from the HSE to draw on their expertise in forging a national entity out of disparate regional ones.

This matters. Water meters are part of the ECB/EU/IMF agreement and the Water Framework Directive. As long as there is no Irish Water, Dept Env will fulfill its duties in the interim — duties that are beyond its actual remit. I worried about that in January. This piece has an intriguing remark at the end. Apparently, at least one county council is rushing through decisions, preempting the presumably stricter regulatory regime expected under Irish Water and the Commission for Energy (and Water) Regulation.

As I have argued before, there is an advantage to electing competent managers (rather than school teachers) to the Dail, as TDs may become ministers in charge of sprawling bureaucracies. Of course, it would help if the higher echelons of the civil service would have similar competencies.

36 thoughts on “Water meters and all that”

  1. The Civil Service’s unwillingness/inability to re-use the expretise and experiences of other departments is staggering and is a major drain on our state with long term negative consequences.

    The most egregious example of this is in the implementation of IT projects. Every department has to learn how to do it from scratch, and then implements separate parallel solutions.

    For example, all local authorities were previously mandated to implement separate planning registers. They now all have different interfaces, different underlying database structures and different mapping implementation.

    The Property Registration Authority (PRA), the Companies Registration Office and the Revenue Commissioners have all had to implements User Identification systems and payment systems. Again all have been done differently. The PRA are way ahead of the the others for their ability to design and implement proper systems but there does not seem to be any willingness for others to use their expertise.

    Similarly the CSO are building a house price index separate form the PRA registration systems. The intention is to use geo-location data rather than the definitive index which the PRA could gather for them if they wanted.

    The core problem is that:
    (a) Inexperienced Departments do not want others intruding on their bailiwick.
    (b) Experienced Departments do not want to take on extra work.

    At interdepartmental meetings where information is supposed to be shared and synergies are supposed to be identified most civil servants are careful to keep their mouths tightly shut out of fear that they might actually identify such a synergy. This would be a disaster as it could lead to cross department co-operation or, even worse, to more experienced people in other departments being assigned the task.

  2. You mean electing competent bag men to the Dail don’t you Richard.

    If ever there was a classic rentier tax this is it as it diverts resourses from actually solving the problem.
    Its only only goal is to collect tax (in a very ineffiecent manner)

    They are trying to rub our noses in it I guess.
    Lets tax water in Ireland….and lets see the reaction….. Ha ha ha ha.

    I have listened to various water tax pieces on the Beeb these past few years and know propoganda when I see it.
    This Spring they said the water levels were similar to 1976 Spring levels ( the year of the drought) AND SOMETHING MUST BE DONE.
    But the water levels only became abnormal during that hot summer….obviously.
    In fairness to the Beeb they did mention that the water utilities have been privatised and the top managers get paid millions so as to run down physical systems so as to maximise its profitability (Ok that last bit was my interpretation)
    I paid that Property because I am stupid I guess…. but if you think I am going to pay for this badness and gross misallocation of resourses……………

    @Richard
    They can’t collect taxes because the money supply has collapsed………. to solve that you increase the money supply.
    Its not very complicated really.
    When / if we increase the base money supply we will see where the real waste lies………..hint hint – liquid fuels.

    Under this present monetary system this tax will merely function to channel remaining resourses back into car subsidies , which is its true function I guess.

  3. @Richard,

    Good to see you’re able to find time to comment on some of the chaos and confusion that continues to increase almost exponentially since you left these shores.

    Have you picked up anything on the status of the public consulatation that was closed for submissions on 24th Feb last? I wrote to DECLG recently trying to find out, but, unsurprisingly, did not receive a response.

    Presumably there is some obligation on the Department to publish a response to the submissions received and to indicate how the whole process is being advanced. As usual, I’m getting the odd hint of furniture and props being moved around behind the scenes – and the odd bit of crockery being thrown, but, of course all this has to be kept well away from public scrutiny. Maybe the Department could get some advice from the economic regulators. They have turned these farcical public consultation processes in to an art form that is almost beyond parody.

    Still I expect all this is such a ‘hot potato’ that it’s being moved rapidly from hand to hand – from the cabinet down – to avoid burned fingers.

  4. @DO’D
    Water metering is not universal in the Netherlands. Water meters are particularly rare in the old parts of large cities and in shared buildings.

    Drought-ridden Southeast England is only now moving towards universal metering.

    In fact, Ireland tries to leapfrog from the back of the queue (hardly any water metering) to ahead of the queue (universal metering).

  5. @Richard

    The last thing a [n Irish] fish discovers is water! [Hofstede]

    Any data on how much is ‘lost’ or ‘wasted’ in Ireland due to leaks, faulty pipes etc or on the quality of the general infrastructure? Some are arguing that upgrading the pipe/pump station infrastructure would be better use of funds … but I’m not in tune on this one.

  6. @DO’D
    The data are so poor that it is hard to say how much water is leaked, and how much water is diverted to other uses. We do know that total drinking water production (450 litre per person per day) is about three times probable water use (150 litre per person per day).

    Most if not all engineers who work daily on this reckon that we should first fix the leaks — if the aim is to reduce water use at minimum cost.

  7. Asking for people to pay for the instrument that will measure how much will be taken from them has to be the funniest thing I’ve read about in ages. I always thought paying to be have pain inflicted on you was somehow illegal in this country.

    Given the less than enthusiastic response to paying the €100 household charge, I wonder how people are going to react to being asked to shell out €300 for this? Let me take a wild guess……

    I presume if one pays for the meter, one owns it (so the article I read this morning suggested) and one can take it with one when one moves?

    Eventually, the government is going to come up with a full blown tax on property that one hopes is going to be reasonably ‘fair’ and relatively ‘progressive’. Why don’t they just cut out all the hassle and make the water rates a flat % of that figure?

  8. South east England is drought ridden because they have not invested in reservoirs since privatisation.
    The population and demand has also increased.
    The climate has not changed dramatically.
    The ownership of natural utilities has changed however.
    Many hundreds of billions have been invested in bank credit “investments” since then , very little in basic life support via fiscal means.
    Over time this = shortages……using either the distributional mechanism of rationing or rationing via rentier extraction.

  9. RT,
    I presume the utility charged with providing the water would borrow/raise the capital to build the infrastructure which would consist of reservoirs/pipes and measuring devices. Then they would charge a Toll to each customer which would be sufficient to pay for the operation maintenancew capex and interest and dividends to the provider of capital.
    I presume the meters would be owned by WI in the same way as the ESB owns the leccy meters…yes/no.

    Council Tax in the UK includes an element of charge for water. Here if you are in a group water scheme you pay?

  10. The Dork is correct in that if we looked after theoney supply we could pay these taxes and indeed return to full employment.

    Increasing base money has limited scope in increasing the money supply though. While banks pay each other in base money, it is not in general circulation.

    For money to enter circulation the commercial bank’s have to create it, somewhat proportional to base money. It is still the case that for new money to enter circulation someone has to organise a bank loan.

    This brings new money but of course new debt. Resolving the debt crisis is difficult under this system.

    However we could introduce a second source of digital money to service the modern economy.

    Paul Ferguson
    Sensible Money

  11. Reducing labour costs (taking money out of peoples pockets) coupled with very large increases in taxation (taking money out of peoples pockets)…this is our attempt to solve an economic crisis?
    As for the water metering-whether its is correct or not to implement it- there has to be a better sell to the public. All most people are hearing is ‘we are taking money of you for something that was previously free’.
    At the moment the approach seems to be that of a condescending older brother- ‘Your’re doing this and thats that’.

    The creation of a semi state body to manage the transition has been a bit ridiculous, with a definitive conclusion needed immediately. This jockeying for position should set off alarm bells in everyones heads, if it was decided completely on merit then it would have been decided already

  12. @Paul
    M1 is base money withen the private euro system in my opinion although much of it is made by commercial banks at the moment.
    The CB / treasury could add 000s in a checking account and the fiscal authority can tax it….. fiscal defecit would vanish as more money would be available to pay off private debt.
    Although waste based industries would vanish also.
    Commercial banks only do their double entry thing……..they don’t create new money , they create new bank credit with a asset / liability.
    Even when they create / buy ? fiscal debt they must subtract it from checking accounts via the tax system to pay the interest , creating a deflationary scenario.
    No new base money is created , more debt is created.

    In a goverment / bank money system such as the US the CB holds the Congress / treasuries debt yet repays most of the interest back…… these are effectivally synthetic greenbacks or interest free tokens.

    There is a significant difference between both systems.

  13. “Irish Water … may want to recruit from the HSE to draw on their expertise in forging a national entity out of disparate regional ones.”

    I take it this is entirely tongue in cheek: if so, quite a good line.

  14. Hi Dork,

    Commercial banks do indeed create bank-account money.

    If a loan application is approved the bank will increase the borrower’s account. No other customer’s account is reduced. The bank’s reserve account is not reduced. So banks so not lend existing money from other people’s deposits or from reserves. The bank can only create new money as a certain multiple of it’s reserve account.

    From there the bank practices double entry bookkeeping. Namely the new bank-account money becomes a liability of the bank and the debtor’s agreement to repay becomes an asset of the bank.

    But it is the case that banks create bank-account money through loans.

    Indeed the reverse is also the case.

    When processing a loan repayment the bank lowers the borrower’s account and lowers the debt. The total of all current accounts is lower and the bank-account money no longer exists. This is why there can be less bank-account money during a recession.

    This is reflected in the bank’s balance sheet. The bank will have less bank-account money as a liability and a lesser debtor as an asset.

    The consequence of this is that every euro created in this way has a corresponding debt. Reducing debt reduces the money supply by the same amount.

    Paul Ferguson,
    Sensible Money

  15. @Devil’s Avocado: “Reducing labour costs (taking money out of peoples pockets) coupled with very large increases in taxation (taking money out of peoples pockets)…this is our attempt to solve an economic crisis?”

    Hi, there. That’s a mighty fine definition of mugging. Our elected clowns in Leinster House are pretty good at this – until all the Moolah is gone. Then what?.

    Reach for the electronic spreadsheet, add some zeros, and … ….

    “Ah! Tried that. Bad outcome.”
    “OK, lets add even more zeros.” “How was that?.”
    “Worse.”
    “OK, lets add even more, even more, zeros!”

    Remind me how much our chief bankers are getting in salary and extras!

    This water business would be hilarious as a Three Stooges sketch. Or perhaps Kenny, Hogan and Gilmore are really Larry, Mo and Curley – in artful disguise. As serious politics it is quite disgraceful.

    The leaks? It varies: 30% -> 60% (or so it is leaked!). It would be a somewhat tedious task to excavate old domestic piping and replace. Much easier to install very, very overpriced meters. Whose hand in the taxpayer’s wallet?

    I had a water meter installed a while back (part of property is commercial). Little plastic thingy, with a dial. DLRCC sent out a team (with pneumatic). Dug hole around old meter. Erected four cones. Departed. Private installer arrived few days later. Took 30 mins to de-install old stopcock and install perky newcomer. Replaced cones. Departed. Some days later DLRCC team re-appeared. Filled excavation with tar. Departed. Some months later new team (private) arrived. Installed meters in all private properties on street (burst a few pipes in process) then re-laid entire paths on both sides in new concrete. I gently enquired of the Ganger (East Europe) about ‘leaks’. Not their responsibility. If any occur DLRCC team will return – at some unspecified date, pneumatize the newly laid concrete and re-fill it with tar! Grrrrr.

  16. @Richard

    Perhaps a bit tongue-in-cheek?!: “it may want to recruit from the HSE to draw on their expertise in forging a national entity out of disparate regional ones”.

  17. The worst part of this “Irish Water” caper is that 4,000 wasters – excuse the pun – working in Local Authorities will now become the basis of the new Water Authority. This is pure rubbish and will leave us like Eirgrid, ESB, Bord Gais etc with more overpaid, overpensioned and overperked Public Servants. The way forward on this is to franchise parts of the country to experienced Water Companies and get rid of the wasters that dont want real jobs and want to “work” who can be made redundant at standard terms. Hogan has not got a proverbial clue how to manage this issue. He is consistently listening to Civil and Public Servants some of which include his own Advisers. Another expensive “cockup” on the way for the Taxpayer to pick up the tab.

  18. @Paul
    I am not disputing that banks create bank account money.
    They do not however create base money.
    M1 should be base money under the euro system but alas its just the M0…. but that is for another day.

    Surely the money trajectory you describe is a exercise in semantics as that “base money(?)” would not have been created without a application for a loan.
    I was thinking of raw base money being injected into the banking system without any loans in the process.

    In reality the bank looks for reserves after it has created the loan

    Consider this “Krugman flashing sign” article by Scot Fullwiler
    I am sure you agree with Scot Fullwiler that a bank does not have to get a deposit to make a loan however I would argue this is not base money.
    It is still Bank credit even if it shows up on M1.

    Krugman – Yes, I will argue here that banks either individually or in the aggregate are not limited by their deposits and the monetary base doesn’t constrain bank lending, but my argument as well as that of the endogenous money crowd in general (MMT, horizontalists, circuitistes, etc.) has nothing to do with whether or not banks “hold hardly any reserves.”

    He (Krugman) continues: “First of all, any individual bank does, in fact, have to lend out the money it receives in deposits. Bank loan officers can’t just issue checks out of thin air; like employees of any financial intermediary, they must buy assets with funds they have on hand. I hope this isn’t controversial, although given what usually happens when we discuss banks, I assume that even this proposition will spur outrage.”

    (SW)In fact it is wrong, and in fact that is not controversial. Let’s start with a basic bank and its customer and do T-accounts for both. The bank creates a loan and a deposit “out of thin air,” and the customer has now a new liability (the loan) and an asset (the deposit)

    As is well known, and by the logic of double-entry accounting, the bank does make a loan out of thin air—no prior deposits or reserves necessary. But this isn’t really the point Krugman wants to make, so let’s just move on. Krugman continues:

    (Krug)“But the usual claim runs like this: sure, this is true of any individual bank, but the money banks lend just ends up being deposited in other banks, so there is no actual balance-sheet constraint on bank lending, and no reserve constraint worth mentioning either. That sounds more like it — but it’s also all wrong.”

    (SW)Actually, that’s not the argument I would make whatsoever. Neither would any person who understands endogenous money, horizontalism, the circuit, etc. The number of banks involved has nothing to do at all with the argument. Our argument is valid if we consider only 1 or 1 million banks. So, again, let’s keep going
    Krugman: “Yes, a loan normally gets deposited in another bank”

    (SW)Actually, a loan doesn’t get deposited in another bank—a deposit gets deposited in another bank. The loan is a bank’s asset, and a deposit is a bank’s liability. Here we see the very beginnings of the importance of remaining clear on accounting if one wants to truly understand what “loans create deposits” means.

    Dork :So the reserves are really swapped from commercial bank to commercial bank…………. if you want truely new reserves they do not come from commercial banks.

    In the case of the Irish example the M1 is declining because not enough bank loans is producing new credit money because the private debt is being paid down……some of which shows up on the declining M1.
    It follows that the goverment must create new raw base electronic or physical currency so that enough medium of exchange is available for commerce.

    Otherwise you are likely tol have just a few individuals with very large time deposits and not enough medium of exchange to facilitate commerce.

    The key here is A DEPOSIT GETS DEPOSITED IN ANOTHER BANK.
    If there is too little money in cash and checking accounts this means……….collapse of commercial activity.

    It follows that the goverment must print either electronically or physically.

  19. This morning saw the release of the Irish League of Credit Unions disposable income tracker survey. It does not make happy reading. Irish households are at breaking point and all our government can do is introduce more taxes. The rational used for the imposition of the Household charge and Water rates is ‘well everywhere has it.’ Yes and some countries chop off the hands of people caught stealing, should we introduce that also. Then you hear and read the pro camp telling us that it works fine in the UK. Well, what they fail to say is that in the UK water charges went up 300% in ten years after they were brought in. Or that with the Property Tax they do not have bin charges, their road tax is a lot less, the health system means that most do not need to pay for private health care. In the Credit Union survey half the people said it felt that they were ‘living for work’. That does not bode well for our countries future as it will led to a rise in health issues relating to stress and depression as more and more find that they cannot do even the simple things that easy the pressure and give some joy in their lives .

  20. @Dork

    Sounds like we agree then so.

    Central Banks create reserve-account money.
    Commercial banks create bank-account money.

    It might appear that the money supply is this demand driven since the number of loan applications should be proportional to the economie’s money supply needs.

    However what we have today is a need for new money but no-one willing or able to get a bank loan.

    Allowing banks to create the main portion money supply will always lead to such problems since they can only create it with a corresponding debt.

    I suggest it’s time to discuss other ways in which we might create money.

  21. The only reason for Irish Water is to extract taxes and T up the company for a sell off. Imagine the irony? 2 meteres of rainfall annually, 40% of the water leaking out through burst pipes to which water meters are to be attached? Politicians screaming this is part of the MOU. Well hopefully not on my watch!

    “…it may want to recruit from the HSE to draw on their expertise in forging a national entity out of disparate regional ones.” Is this tongue in cheek? Software that could not work, trollies out the door, GP letters sitting in a boxes in Tallaght for years because if they were opened the queue would get longer and 19% absenteeism in one hospital and 10% in Mary’s “Center’s of Excellence”. Just look at the children’s hospital saga. I could actually name names of people that died but it would not be ethical.

    Do you really believe property charges will be somewhere in the region of “500 and 1000” so the differential between houses at the bottom and the top will be a mere 500 Euro? Simply not credible. Property charges if they were to be accepted would be anything from 500 to 5,000 or more. What is the likely hood of SF saying we will bin the lot before the next election? Quite high, I would say.

    I dealt with the DOE during the boom years and they were one of the most dysfunctional government departments ever, and under Dick Roach files, reports could, figuratively speaking, be thrown in the bin and a hand written letter from Dick could over-rule the most detailed inspectors reports as happened with Bono’s “flying saucer” building on Wellington Quay which we still have to look forward to.

    As for not calling in tax experts? Tax experts are only tax experts up to the point where people decide to withdraw from the system of taxation they no longer have any confidence in. That is the real worry of the household charge revolt. i.e. that it will get nasty and spread like a virus to other areas of taxation.

  22. @Paul
    Yes we seem to agree on a lot.
    The money supply should not be subtracted because of the lack of demand for new bank loans / mortgages etc.
    As this credit junk gets paid down less medium of exchange is available for transaction…….
    Which means less money is available to seek new growth areas which are perhaps less wasteful of resourses as I believe bank credit has the property of dragging energy from the future into today.

  23. @Richard

    Is there any data available for Ireland which shows the marginal cost of delivering a litre of water to a typical home on a mains system.

    Presumably each litre has to be treated to remove nasties, and do we still add goodies like fluouride? And each litre has to be pumped from a reservoir to a home that might be what? 5km from the reservoir. But isn’t that it?

    Has there been a study to compare the cost of a metering system designed to cut down use with the cost of cutting leaks and the marginal cost of delivering water to a home?

  24. @Jagdip
    Not to my knowledge. We know the total spend, but not much more.

    One of the reasons for the delay is that the Dept Public Spending did not much like the CBA done on this by the Dept Env — it did not contain such useful information as you ask for. As far as I know, the CBA was never revised.

  25. On the “Ireland, for instance, does not have a problem with tax collection” side of things, Sheila Killian has a relevant post on TASC’s Progressive Economy blog http://www.progressive-economy.ie/2012/04/power-trust-and-household-charge.html

    Meanwhile, in my own more anoraky sphere, the tax-dodging boat-owners, I have today been told that the number of owners paying the Mineral Oil Tax, which was 37 in 2009 and 41 in 2010, was 22 in 2011. That’s out of a relevant population that is probably in five figures.

    The first principle of taxation should be: if you grab them by the [delicate parts of the anatomy], their hearts and minds will follow. Taxes that are essentially voluntary don’t work (apart from the lottery).

    bjg

  26. Heres a suggestion

    So politicians promise that Irish water is necessary, wont be sold, must be self financing, run commercially and so on

    Why not set it up that way?

    Why not set up Irish Water Co-op. A share to every bill payer (can have more based on first year volume/bill for industrial customers)…. absolutey no waivers… If the government/local authorities want to provide waivers, they pay the bill….

    And the co-op set up so 95%+ of shares must agree to be converted to a plc or sold…

    Result: a commercial water company, no hidden subsidies…. owned by the people of Ireland…

    Why not? It cant be any worse than being owned and regulated by the Minister.

  27. I forgot to mention, it can be self financing… The Co-op can go to their members for investment…

  28. Metering and charging for water will, hopefully, encourage those domestic users who are currently wasting water to desist. However, insofar as the average user is not wasting water to any significant extent there seems to be little to be gained from metering. Say 50% are not wasting at all. 40% are wasting 20% more than base usage and 10% are wasting 100% of base usage.
    Metering would on those make believe assumptions save 18% of the total current cost. I note that politicians are saying that the cost of providing water is about 1.2bn. Not all of that can be attributed to providing domestic water. What reduction of that 1.2bn will metering bring about?
    How much will it cost to monitor the meters, bill the households, chase arrears?
    I don’t have enough information to complete this analysis but I would stake a large amount on the proposition that spending more than 500m on metering would be a very poor decision.

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