Reports abound that Irish Water is to die. Fianna Fáil has made Irish Water’s scrapping a pre-condition of any coalition, and sources around Fine Gael are fairly happy to see this toxic object redeveloped, at least in some way. The strategic interaction of the party blocs, the media, and the electorate has cast paying water charges into a mire of uncertainty, forcing the Taoiseach to plead with people to continue to pay their water bills.
All of a sudden, even that slight majority of people who were paying water charges have good reason to doubt whether paying for water services is worth it anymore. Surely if Irish Water is redesigned in some way, water charges of some type will have to keep being made to households and businesses?
There is no point debating how Irish Water should have been set up, or could have been set up. The fact is that it exists today, doing its work at some level of efficiency, what level that might be is anyone’s guess.
What is worth debating is what the likely effects of turning a long run infrastructural investment vehicle, however poorly designed and implemented, into a short term political football, might be.
67 replies on “Scrapping Irish Water?”
It’s likely that any wind-down will result in even more costs which won’t be replaced by any additional new taxes which means less money to spend elsewhere on any of the other hot topic issues (e.g. on social housing etc.)
The debate on this issue has gone completely off the rails. Whatever investigations need to be carried out into why and how it was set up, in the view of some, or how it should be altered or even abolished, the fact of the matter is that it has been lawfully established and is doing its job.
No politician, in a democracy worthy of the name, can go above the law (although some, disgracefully, make a point of blatantly flouting it, at least in their utterances).
The message, until legislation is passed to alter the law, is “pay your water bill”. No politician will be available to pay it for you later.
because most of the media are innumerate these kind of ridiculous proposals can often gain traction
“What is worth debating is what the likely effects of turning a long run infrastructural investment vehicle, however poorly designed and implemented, into a short term political football, might be.”
And that’s the problem.
Irish Water should be a public utility that builds and maintains water services first and foremost. That should be its primary purpose.
But it hasn’t been. It’s primary purpose has been an accounting exercise. That’s not a purpose, that’s an implementation detail for the utility.
The cart was put before the horse.
People want water and sewage for their homes. They want a number to call if there’s an issue. And most of us are actually quite fine paying for such a utility. We have no interest in paying for spreadsheets and consultants. Can’t make a cuppa with a pivot table.
Some facts have not changed.
1) Water is a precious resource, fundamental to healthy living.
2) A efficient distribution / waste collection system is highly important to any society.
3) As populations increase, the pressure on the environment also increases. Protecting the environment is required for sustainability of future generations.
4) Climate change is in progress, while Ireland may be subjected to more wet and miserable weather, the eastern Mediterranean is undergoing it’s worst drought in 900 years….
I have no doubt if Ireland were to suffer drought, there would be howls of protest from the media, farmers and society in general.
I personally do believe that metering water for users is objective and important. People will not change from bad habits to good unless there is a financial incentive. Education in school should instill the importance of water.
However at what cost a household should pay is a different matter entirely.
But if water is to be free, the shortfall will be made up elsewhere..
It is possible that with proper engineering, efficient use of existing water reserves Ireland could become a exporter of water to southern Spain / France for example. Malaysia already does this for Singapore.
Both local Irish water charges and a property tax were abolished in the 1990s.
It may well be déjà vu all over again for both, by 2019
The average water bill in England in 2012 was £376.
Eurostat said in 2015 that in 2013, freshwater abstraction by public water supply ranged across the EU Member States from a high of 159.1 m³ of water per inhabitant in Italy (2012 data) down to a low of 32.7 m³ per inhabitant in Malta — see Figure 3. Some of the patterns of freshwater abstraction from public supply reflect specific conditions in the EU Member States: for example, in Ireland (140.3 m³ per inhabitant in 2007) the use of water from the public supply was still free of charge, while in Bulgaria (125.1 m³ per inhabitant in 2013) there were particularly high losses from the public network. Abstraction rates were also high in some non-EU Member States, notably Iceland (2012 data) and Norway.
There is a striking statistic from Italy which has low water charges and Ireland is second for consumption with none (stats from 2007). However in Italy there is a big demand for bottled water because people don’t trust the public supply. 😮
There are a lot of things which have “gone off the rails” in this country!
Why should IW be any different?
Just one example….If you become the victim of a burglary….. here is what happens.
1) You suffer a financial loss of property i.e. TV or jewellery.
2) You suffer a further financial loss in the VAT you pay when replacing the stolen property.
3) You suffer a further financial loss on your insurance premium which has now increased.
4) You suffer a further financial loss on the Govt Levy which is placed on the insurance premium.
5) When the culprit is eventually caught, you suffer a further financial loss (as a taxpayer) in funding the robbers legal representation.
Crime hits victims hard in Ireland.
It’s not just Irish Water which is being mismanaged…. its the entire state and its various institutions. Quelle Surprise!!
Its deja vu all over again with a cover version of that old hit “We are where we are…”
The electorate seem to think the implementation of water charges (not necessarily the principle of water charges) was so duff that a failure to react to the facts created on the ground would amount to a form of moral hazard.
Oliver Twist, 1838 (Courtesy Wikipedia) When Mr. Bumble, the unhappy spouse of a domineering wife, is told in court that “…the law supposes that your wife acts under your direction”, replies:
“If the law supposes that,” said Mr. Bumble, squeezing his hat emphatically in both hands, “the law is a ass – a idiot”.
Innumerable criticisms can be made of the law but if it is not followed, therein lies anarchy. In fact, this is the most significant issue to emerge from the election and the current silly furore about Irish Water.
I am not really worried. Behind it all, as I pointed out on the other thread, the vast majority of the population respect both the permanent administration of the country and its legal system. (Witness how even that party once described by one of its leaders as “slightly constitutional” had, according to reports, the lawyers lined up at every close election count).
No major legislative initiatives are possible in the current circumstances and the conduct of ongoing business, including that of Irish Water, is all that is possible. Anyone thinking of throwing their bills in the fire during this period, or advising others to do so, are ill-advised.
To quote the words of Abraham Lincoln;
“Elections belong to the people. It’s their decision. If they decide to turn their back on the fire and burn their behinds, then they will just have to sit on their blisters.”
Until the next election.
Establishing a single national entity providing water and waste water services had the potential to generate significant efficiencies. But these would be hard won because its initial operating expenditure was more than double than that of other similarly-sized water utilities on these islands. But they could be brought down over time. Most of the other water utilities also started off with high opex – but not as high as Irish Water.
The establishment of IW as a semi-state (or as a subsidiary of an existing semi-state) generated a further benefit it that it (or its parent) could borrow to finance (some) investment in its own right and this would avoid the direct funding of investment from general government funds on a pay-as-you-go basis.
If the Government had stopped at the point it is possible it might have avoided trouble. Charging households for water and waste water services makes excellent economic sense – even if the charges do not cover the economic costs. But it is difficult to convince housholds to contribute when the actual costs are hugely in excess of economic costs – and when it is clear that an array of rent-seeking special interests are gorging themselves in this newly established trough. In addition, the government had little interest in the efficiency benefits of water charges; its focus was on extracting enough revenue from household and non-household service users to pull the wool over Eurostat’s eyes so it would define IW as being off its books and allow the Government to increase the “fiscal space” that it could use to bribe voters with their own money.
Since household users are contributing far less that the approx. €160m they should be (out of a total revenue requirement in excess of €1 billion), it would make sense to suspend household charges for, say, 5 years or until the cost base has been reduced to be comparable with those of other similarly-sized water utilities on these islands and the benefits of a single national entity are more apparent to households.
However, IW has become so hated that it appears it will have to be re-established as a new entity.
As you infer…”what goes around comes around”…and “the law is the law”.
But the Irish State also has a duty and a obligation to
1) Protect citizens from harm.
2) Spend tax funds wisely and carefully.
The Irish state does not appear to be capable of either, due to either a deficit in intelligence or callous indifference.
Some semblance of sanity appears to be returning.
To be read in the same context, this piece by Geraldine Kennedy.
The “pol corrs” otherwise seem to be utterly rudderless.
Of course, I agree! But that is a different debate. The state is the people who make it up. We now have a mass of irresponsible elected representatives across the political spectrum setting out to prove that conflating such issues is a very risky affair. And the electorate has only itself to blame.
Some potential benefits of Irish Water rising to the top of the political agenda:
– Irish Water is horrifically expensive for what it does, and needs a complete rethink that is likely to at least require a big change in direction, replacing senior management and cutting fairly large numbers of jobs. That is only likely to happen if our political classes are in fear of the loss of their careers on a massive scale.
– Universal domestic water metering is appallingly economically inefficient in a country like Ireland with plentiful unprocessed fresh water. The money that has been sunk into this already is gone with no proportionate benefit to show. Irish Water is still working on this equivalent of borrowing stacks of €500 notes to shovel them into a furnace, and if we can stop them from continuing with this it will benefit the rest of us (other than their contractors) immediately.
– It is apparent that there is a high degree of hidden cross-subsidy between different parts of the country built into Irish Water. It is desirable that this should be made transparent. Whether it is a good or bad idea to move water services back to the local authorities, at least this would bring the cross-subsidies into the public domain.
– Political actions should have consequences or politics is worthless. Fine Gael and Labour screwed up the design of Irish Water about as badly as they could possibly have done. It is hugely beneficial to Irish public life and governance that their scandalous behaviour should result in a major political scandal.
– We are a democracy, and it would be rather nice if what the people think counted for something.
It is more than likely that this is a storm in a teacup, whipped up by an utterly useless media, which has totally abandoned the practice of reporting facts, and instead prints anything that will generate a sensationalist headline that gullible people then swallow..
Meantime, in the same media its gone rather unreported that a raft of statistics out this week confirm beyond doubt that the boom continued into Q1 this year and may even have accelerated. The latest statistic was today’s industrial production figures which showed the volume of manufacturing production up a staggering 48 per cent y-o-y in January. Combine this with the 18% increase in tourist numbers in Jan, the 19% increase in milk output in Jan, the 35% increase in new car sales in Feb, and we could be getting close to 10% y-o-y GDP/GNP growth in Q1. It is true that a large number of people are forecasting a recession, as they do every year. No doubt they will one day be proved correct, just as the man who has been predicting each year since 1884 that Leicester City will win the Premier League is on the brink of being proved right at last. All that one can sat about the Irish economy is that so far there is not a scintilla of a sign of it.
I think we have entered a new stage of the endless economic crisis. Political incoherence. Trump, Brexit, Le Pen and Irish water. Not unrelated to NIRP.
You make some very valid points. The establishment of Irish Water pitched an unholy coalition of senior governing politicians, department officials, the CER, the management, staf and unions of BGE (and the extended managment, staff and unions of Ervia when IW was joined with BGE), the management, staff and unions of the local authorities’ water service divisions, tame academics, lazy, overstretched or suborned media types and the well-heeled professional (legal, accounting, IT, management consulting, PR) service providers against the vast majority of citizens who were re
quired to fill the trough in which this unholy coalition had their snouts.
As I’ve indicated, IW will have to be re-established as a stand-alone semi-state with a new board and new layers of senior management. The 12-year Service Level Agreement with the Local Authorities will have to be reviewed and revised. As a regulator, the CER is a total waste of space – and not just in the water sector. It had failed continuously as an electricity and gas sector regulator. Some means will need to be devised to bear effective downward pressure on unjustified costs in the water sector.
However, it is not and should not be an issue of sacking underemployed workers in the local authorities’ water service divisions. Therre should be scope for re-training and redeployment – particularly in the area of a programme of insulating households which would generate huge net benefits.
Households charges should be suspended and the limited proceeds replaced by subvention from general government funds. However, it should be made clear that household charges will be re-introduced when the new entity has brought its costs down to levels similar to those of comparable water utilities.
So, in this respect, I would argue that the household meter installation programme should be continued to completion. The delivery of potable water is a valuable service and users should pay. But their usage must be quantified.
As for households who have paid, it should be possible to log their payments as a which will be used up when household charges are re-applied.
“The state is the people who make it up.”
Surely you couldn’t make it up!
I posted this contribution on the thread dealing with the need for a wide tax base. It all comes down to money. And the end of the illusion that there is a goldmine in the basement of the Department of Finance.
Dan O’Brien on possibility of the country becoming ungovernable.
The analysis could hardly be improved upon. However, the likelihood of any electoral change being zero (the Kingdom would not stand for it!), salvation has to be sought in other directions.
The conundrum of how countries with ostensibly equally fragmented parliaments can have such different economic performances (Italy versus the Netherlands) is readily explained. There is a fundamental consensus between the organised sectoral interests (SI) on a basic societal foundation, built around social market economic principles, in the successful economies. It is lacking in Ireland, the fact being masked by blanket spending in good times and even in bad.
This consensus can only be achieved in Irish circumstances by detailed line by line examination of taxation and spending. The hope must be that the task of cobbling together a government capable of adopting a budget will bring this about.
It would have been a help had the outgoing government put in place the administrative capacity to enable this to be done. It is never too late.
“The state is the people who make it up.”
Yeah, so what?
“We now have a mass of irresponsible elected representatives across the political spectrum setting out to prove that conflating such issues is a very risky affair.
“Irresponsible.” Really? Now how do you propose to explain that comment; that is, what is their manner of being ‘irresponsible’? OK, so Michael O’Leary allowed as how some of them were a bunch of Liquorish Allsorts – but he would say such an ‘irresponsible’ thing, wouldn’t he?
“And the electorate has only itself to blame.” This is utter and complete rubbish. Its mindless claptrap.
And bye-the-bye. Potable water is a somewhat vauable resource. Its not exactly costless to purify and transport. It has to be paid for same as gas and electricity. When was the last time you heard folk whinging about ‘electricty’ being a ‘funadamental’ human right? Yeah, I thought so.
If your water supply is cut off its inconvenient – there are workarounds available. But try living without electricity. Most of our modern stuff grinds to an immediate halt. Literally!
We have always had a mass of irresponsible representatives, the main difference being some masses are under a “party whip”.
Perhaps it is not the people’s fault, more a trait of the PR voting system Ireland uses.
But I think the crowning opinion of the last 5 years was that of An Taoiseach Mr Enda Kenny.
The man who went on National TV (2011) with the announcement that this economic disaster was “not your fault”. Remember that one?
A few months later in Davos hob nobbing with the wealthy he declared “everybody went mad”.
From these two proclamations we can deduct that…
“Irish Citizens are not guilty by reason of insanity”.
You have a point there.
As you will have gathered, I have a rather low opinion of the quality of our political class. It is not possible to have a meaningful discussion on the basis of their utterances. The only question is; where is democracy, as exercised in the Irish fashion, leading us?
Once over the hump of the charade of the voting for Taoiseach, the debate will have to turn to the devil in the budgetary detail, assuming the DOF/DPER can provide it, in the negotiations among the possible combinations that might support a minority government led by FG, the most likely outcome.
It is worth recalling what the Commission, the “external examiner” (a first in Ireland’s history of independence) had to say in its most recent report. (Page 76)
No progress in limiting discretionary powers
to change expenditure ceilings. These have
been revised up repeatedly on the back of
better than expected growth, i.e. beyond
specific and predefined contingencies. No
changes have been made to the legal
framework defining the conditions under
which expenditure ceilings can be revised.
There was no imperative for outgoing government to make these changes given the majority which it held (and proceeded to squander in the process). Any programme agreement for the new government that does not include them is destined to collapse. Or, put in another way, is it now in the absolute interest of the parties to any agreement to include them? It is certainly in the national interest.
Just a reminder that there’s less money for water now than there was before Irish Water was set up:
I thought it would give you a chuckle 🙂
A different perspective here… but insightful nonetheless..may lift your spirits a touch.
Provided of course FF and FG can bury the hatchet. No guarantee of that unfortunately.
Like all politicians, Deputy Donnelly is being very selective. He’s correct in his focus on how the relatively small contribution from households is being absorbed to no effective purpose. But he’s ignoring the fact that IW (within Ervia) is able to borrow on its own account and this is reducing the subventions from central funds to finance capital expenditure on a pay-as-you-go basis.
Confirmation that most of the media commentary this week is idle speculation:
“Fianna Fáil finance spokesman Michael McGrath has said it is not tenable that a caretaker government remain in place for any prolonged period of time.”
“Speaking in Cork to RTÉ News, Mr McGrath said there are pressing issues in the health service and housing that need to be addressed.”
“He added that there are growing concerns on the international front on the impact a caretaker government would have on Ireland’s economy.”
“We have to have a government in place with authority and the capacity to address the issues of concern to the Irish people,” he said.
I take it that “caretaker government not tenable”, “growing concerns on the international front”, “authority” and “capacity” are code for:
(a) A deal will be struck between FF and FG.
(b) Irish Water won’t be a major issue.
IW the quango that keeps on giving!
There has been no honesty or real accountability with regards to this whole mess. Well over half a million people marched on the streets of Irish towns and cities to demands it abolition. They represented many others who did not want this disaster forced on the country. Just like with Property tax, people said no but unlike property tax the government could not force people to pay by giving the collection to the Revenue. People objected to the introduction of more tax on their already taxed income. The folk who cheer water and property tax think that this is great were as the majority of workers and pensioners don’t.
IW was not introduced to encourage conservation, conservation would cause the company problems that could only be solved by upping the charge so that households would be paying €800 to €1000.00 in a few short years for a basic human right. This is Ireland after all and we always pay through the nose.
When bin charges were brought in people were told that they would never be privatised, that there would be tax credits and the cost would be kept down. All three of those promises have been smashed and from July this year people will have to pay per bin lift for their green waste which was the aim of charges in the first place to encourage recycling. IW will be a case of history repeating when it comes to how the costs keep rising and who ends up providing the service.
The Figures that IW release about payment are wrong and they will not let real scrutiny happen. If so many are paying why have less than half claimed the conservation grant and many of those claiming the grant are actually not customers of IW but people with private schemes.
Why don’t people/media ask what happened to all the money that was collected through car tax, VAT, VRT and general taxation for the provision of clean drinking water by previous local and national governments?
There is this perception put out that private sector can do it better and for less. It is rubbish. All that happens is that the state pays the basic costs out of taxes and the public pay for the profit out of the charges that are then demanded for a service that does not improve. It really just ends up being Corporate welfare.
Stephen, a small but significant edit if you don’t mind. Many thanks.
There is no cost benefit analysis underpinning the universal metering of domestic water in Ireland, and the reason for this is that it would show the idea of universal metering of domestic water in Ireland to be silly. Ministry of Funny Walks-like silly. Other countries similar to Ireland don’t do it. The country most comparable to Ireland (other than the fact it has a functioning water company), Scotland, does not meter domestic water users at all, and its water company says it would not make sense to do so.
The underlying economic reason for this difference from many other parts of the world is straightforward. There is no shortage of untreated water in Scotland or Ireland, so the economic cost of untreated fresh water is very low in most locations relative to other water services costs.
For any water scheme of a reasonably decent size, the cost of turning untreated water into treated water is a small share of total costs. The overall costs of large scale water supply in a place like Scotland or Ireland are overwhelmingly in providing the distribution network, the waste water collection network, customer billing and all that lies behind these. For a place with plentiful untreated water, these costs are more or less fixed with respect to volume consumed by each home. They do not vary meaningfully with the volume of water consumed over the short run, and are pretty insensitive the the volume consumed even over the long run. For this reason, if domestic customers are billed accurately according to the economic cost of providing their water, most of the charge will be in the fixed connection fee and very little of it in the variable volume-based charge. Given that installing, reading and maintaining meters, doing variable billing, and all the other costs associated with variable billing add significantly to overall system costs, the vast majority of customers will be made worse off with meter-based pricing based on the economic cost, relative to a flat charge without metering. Society as a whole will also be worse off.
Only for commercial scale customers are volumes are big enough for variation in costs to be big enough to be worth billing by volume.
Irish Water has already flushed some hundreds of millions of euros down the drain on metering, heading towards an eventual total of about €600 million on set up costs, with lots more to come on maintenance, meter reading, data processing and other costs, and even more if they ever get to the point of variable billing. There is a serious question about whether the net value of an installed meter is positive or negative even after it has cost about €400 to install. Installing more of them is unequivocally wasteful. The money could be used far better elsewhere, or even better not borrowed at all.
It’s hard to imagine what lapse of rationality possessed the Government to pick on metering as a strategy, and to build on this by demanding that heavier users subsidise most of the costs imposed by lighter users. If I had to guess I would imagine it was about the narrative of selling water charges to a public that was assumed to be gullible. With a side-order of being more modern and European. Just like with the very similar invest-in-something-dumb-but-seemingly-clever scandal over electronic voting
I seldom bother to read what is written by the commentator in question, largely because one can predict what he is going to say. The article you linked to is no exception. The real lesson from the election is the domination of local, personality and sectoral driven politics to the detriment of the nation as a whole. The left-right analogy lacks any real meaning, the existence of a conservative, for want of a better word, majority being an accepted, explicitly or implicitly, element in any discussion.
What is missing is what makes for successful “social market” economies i.e. a consensus in society on certain basic principles all revolving around the idea of equality in terms of access to certain basic conditions of life; health care, education, social welfare, housing and pensions. If these are missing from whatever detailed programme emerges, and we get instead a mish-mash of local and sectoral deals, which is what a lot of the independents and the people who elected them, are angling for, we will deserve to be left where we are, including on trolleys in A & E.
It is a very heartening development, not because either FG or FF deserve the slightest credit, but because they both evidently have been forced to come to terms with fact that the EU will not wear any further pandering, for narrow electoral reasons, to the great Irish hang-up about water.
The situation otherwise, however, remains one of impasse. The “twins” DOF/DPER cannot simply sit on their hands while it continues. The detailed work of budget preparation is now also part of a wider EU led, if impossibly and needlessly complicated, European system. It will not, however, guarantee votes in the Dáil.
Maybe FF can have their new state development bank invest in a revamped water utility whose pricing structure will be determined by focus groups.
‘It’s THE QUANGO/TROUGH’ – stupids – not really the pay for usage principle for most citizens who despise IW.
One benefit of meter installation is that it helped identify leaks and (unintentional) wastage.
News to me that Scottush Water does not charge for domestic water.
According to their website the average household bill this year will be around £346.
In a first best, second best or third best world, you’d be absolutely spot-on abou the meters. But we’re so far from anything like these states of grace in this instance – this really is a salvage job – that there’s a need to be selective in what needs to be disentangled.
As per usual, Mr. McCarthy gets to the heart of the matter here:
In addition to the austerity fatigue and the political opportunism that Colm suggests provoked and sustained opposition to water charges I would also contend that citizens’ disgust and anger at evidence of the rent-exracting skills of all involved (to which he refers) – with the rent extraction at their expense – played a major role.
No durable resolution of this mess will be possible until this rent-extraction is addressed. This rent extraction goes on all of the time in the sheltered private, public and semi-state sectors, but every effort is made to conceal it from the majority of ordinary citizens who are being gouged to fund this rent-seeking.
It’s simply that the greed and rent-seeking was so brazen and blatant with the establishment of irish Water that the eyes of many citizens were finally opened to see in this instance by whom and how they are being gouged.
The resolution of the Irish Water debacle is relatively simple.
1. A constitutional amendment guaranteeing the public ownership of Uisce Eireann and the water distribution system. There is no doubt that privatisation was on the agenda, and still is on the agenda of certain powerful sections the the Irish and European elites.
2. Apply charges only above the basic needs of a normal household. This should eliminate waste, which was we are told one of the original objectives. Continue metering, to achieve less wastage objective
The small shortfall will have to come from general revenue.
3. The major infrastructural investment that is required must continue, again coming from general revenue.
4. Where will the money come from? Any party that says the country could afford to forego 4.6 billion annually in USC might have some ideas on that.
[I concede that there are some very good points above re the questionable economics of water metering.]
Water charges, however justifiable, like all fixed charges are regressive, and struck hardest at the poorer sections of society.
However the method and timing of their implementation raised the very reasonable suspicion of an insider smash and grab raid for a vital public resource, with all the usual parties looked after.
That is the first suspicion that should be laid to rest, by a constitutional amendment. That is, if it was only a suspicion in the first place.
We had a fairly constructive discussion on the show on Saturday about it
I thought Colm Keena and Richard Tol were especially good. I don’t agree with the conclusions Eamon O’Cuiv reached, but he made some very good points, especially about the whole problem of water out.
The process of establishing Irish Water reflected key aspects of the Irish political system:
1. Politicians/ ministers lack of interest in the boring but crucial issue of process. Once the legislation was passed, neither Kenny or Hogan paid any attention to how the agency would be established while they ignored the past campaigns that had been triggered by local charges.
2. There was no attention to public transparency. When reports of consultancy contracts costing €50m or more began appearing in the media together with information that 12-year service contracts were agreed with existing water services at local authorities:
a) there had been no decisions on what the charges for households would be nor an estimate of the subsidy for the 12-year transition;
b) the IW website provided no budget information and no indication of cost for consumers;
c) in effect after the PR disaster, the political disaster intensified as there were big variations in the estimates of the expected bills.
3. Colm refers to the past provision of electricity. It’s an interesting point that there are no protests about the price of electricity for consumers, which is the 3rd highest in Europe.
Politicians are often accused of introducing stealth taxes but the public seems to like them.
Jean Baptiste Colbert (1619–83), finance minister of King Louis XIV of France, reputedly said: “The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.”
Residential rates and road tax were abolished in 1977 but a £5 registration fee was introduced and eventually whether a fee or tax, the levy was back.
Any fool knows that it’s much easier to abolish a tax than raise taxes and after the experience of boom and bust, Kenny knew that too, when he proposed abolishing the USC.
This wheeze is even more galling when considering the deflationary environment that is expected a decade ahead.
In the past inflation aided governments as there was typically a lag in adjusting for example tax thresholds.
According to Morgan Stanley economists, the US public debt ratio fell by about 73% in 1946-2003 but inflation accounted for an average 1.6% annual fall compared with GDP growth of 1.3%.
on 1. the referendum. Agreed!! I’ve been on this since the start.
“we get instead a mish-mash of local and sectoral deals, which is what a lot of the independents and the people who elected them, are angling for, we will deserve to be left where we are, including on trolleys in A & E.”
Interesting that you should example trolleys. The situation with emergency care and the follow-on intensive care needed is a problem of the infrastructure, staffs facilities and ancillary resources being in somewhat separate locations to the needy patients. Its not simply ‘the beds’ – its the entire infrastructure and staffs. So, what to do? Bring (ie. trolly) the emergencies to the where the underused or idel resources are currently located? Or build-out additional (fully staffed) infrastructure in the major population centres – where the needy are?
Do we face the unpleasant prospect that the Irish taxpayer may slowly become insolvent – and simply cannot ‘carry’ any more Parish Pump financial boondoggles – of whatever nature? Not looking good.
IW = ‘HSE 2’ – massively bloated bureaucracy allied to very cosy arrangements with current and recently retired local authority execs.
No resolution to IW until the above situation is corrected.
A constitutional clause on the non-privatization of water might look a bit odd, alongside clauses on lofty principles such as freedom of speech, assembly, association. Why no clauses on the non-privatization of other state-run agencies such as health or the prison service? Why no clause on the non-privatization of other services essential to life, such as food? Is it safe to leave the regulation of these important areas to the Dail, given that we don’t trust that lot anymore?
The hare about privatisation was put running by some of the usual left-wing suspects to distract and confuse ordinary voters when the latter were slowly becoming aware of the avaricious rent-seeking of the managements, staff and unions of both the local authorities and BGE in the establishment of Irish Water. The equally avaricious rent-seeking of the professional service providers in the sheltered private sector was used to reinforce this distraction. And the government’s ham-fisted efforts to keep IW off its books just added to the distraction and the confusion.
Following on from your show, Colm Keena has a piece in today’s IT:
While he makes some sense when he criticises Eamon Ó’Cúiv’s NRA model for IW, what he then advances is typical of the usual waffle that passes for journalism in Ireland. First, there is no consideration of the excessive annual operating expenditure of IW which is largely driven by inefficiencies and rent-seeking. (FF’s proposal to suspend household water charges until this mess is sorted out makes some sense, because the relatively small amount of revenue generated by households is being swallowed by these rents and inefficiencies.)
Secondly, the ESB’s and BGE’s approach to financing their activities is presented as being far superior to the ‘pay-as-you-go’ financing of investment from general government funds. The reality is that the ESB’s and BGE’s approach to financing its activities is probably the most inefficient and, in terms of its impact on final consumers, the most costly and regressive that could be employed.
Both the ESB and BGE (now Ervia) abuse the dysfunctional energy regulatory arrangements to extract extra revenue up-front both directly indirectly from final consumers to part-finance their investment. The state, as the majority or sole owner of these businesses on behalf of all citizens, has consistently failed to provide one brown cent of equity investment to part-finance the huge investment programmes of these businesses. Final consumers have been on the hook so that electricity prices in Ireland are among the highest in the EU.
But you won’t find any Irish journalist highlighting this rip-off or the reasons why it continues. Instead you’ll have puff pieces extolling this rip-off model.
Only in Ireland…but the Irish Water debacle started to open the eyes of some citizens about how and by whom they’re being ripped off.
Curious point about the commentator, however perspectives are interesting, in particular honest ones.
I see your vision of how things should be…. but it has two flaws.
1) Equality is a very subjective term, usually refers to getting somebody else to pay for what I can enjoy. The debate about progressive taxation being just one example.
2) Honesty, or the lack of it ensures the right approach rarely gets implemented.
I am not surprised at the abysmal failure of the Irish being unable to implement IW effectively. It is embarrassingly Irish so to speak.
For a entity to be effective / efficient I am surprised of the lack of awareness of commentators that the private sector is way ahead of the public sector.
No company / organization can be efficient / effective with the two albatrosses of
1) Militant Trade Unionism
2) Inverted Micawberism of Govt Leadership
hanging around its neck.
Just one example, compare Ryanair to Aer Lingus.
Remember Ms Mary Harney visit to China during the 1990’s, it was announced at that time Aer Lingus would look into direct flights from Dublin to Shanghai?
We are still waiting!
Excellent programme! Positively the best on the entire saga. Puts the national broadcaster to shame.
My own guess is that Irish Water will survive, largely as planned, not least because of the totally muddled – and politically highly damaging – position of FF (a point which emerged with great clarity) in the event of a second election.
I compared the Irish political class on the thread dealing with the Ireland Country Report; 1916 to an unruly school class when the teacher is out of the room. However, the more sensible students can hear the footsteps coming down the corridor (notably the finance spokesman for FF) not because of the IW on or off balance sheet argument but because only a specific financial envelope will be available under the new EU rules.
How to handle this is the central problem in constructing any viable government, a fact which is being willfully ignored by both the politicians themselves, for understandable reasons, and the electorate which “wants things to be as they were before” i.e. pre-crisis. The media cannot, however, have a free pass on the topic.
What the Commission had to say (page 76 of Report).
No progress in limiting discretionary powers
to change expenditure ceilings. These have
been revised up repeatedly on the back of
better than expected growth, i.e. beyond
specific and predefined contingencies. No
changes have been made to the legal
framework defining the conditions under
which expenditure ceilings can be revised.
The report elsewhere constitutes a catalogue of failures by the outgoing government in areas that are well known and many times discussed; health services, access to medical profession, legal services etc. etc.
“The Troika and/or the IMF made us do it” might come in handy as a kind of leaven in mixing the necessary ingredients. Failing action, the international markets may well do it instead.
Grumpy said: “The electorate seem to think the implementation of water charges (not necessarily the principle of water charges) was so duff that a failure to react to the facts created on the ground would amount to a form of moral hazard.”
I think that is quite correct.
Error no. 1 – Irish Water was set by FG to get it “off balance sheet” and ready for privatisation, just like our rural broadband which is so off balance sheet that it does not exist.
Error no. 2 – The billing was not going to be equitable because not all houses were metered. Then it was not linked to metering so it was not going to be linked to conservation.
Error no. 3 – Even if metering were to function, the billing was to be set up so that people would pay whether they conserved water or not insofar as everybody had to pay. This went against the principle subscribed to by many that people have a basic right to a supply of water in Ireland and that same should be provided for in general taxation. Even the Green Party agree with this.
Error no. 4 – No allowance was made for those who have legitimate needs for additional water and those who do not have the resources to pay. The Labour Party grant which was payable to people who did not even have to pay water charges was repugnant.
Error no. 5 – All the staff were transferred from the local authorities with no savings arising form the amalgamation of organisations and duplication of functions. It was the HSE all over again. No demonstrable efficiencies which the Government could point to were achieved. Certainly there was better information about the problems and where to direct resources but no demonstration of greater efficiencies in actually carrying out the maintenance work.
FF are right that the purpose of Irish Water should be to generate efficiencies and proper central management before it starts to concentrate on billing and getting money in. The focus needs to be on the infrastructure first and foremost, and accountability must be concentrated in that area. This will give time for a far more equitable and balanced basis for billing can be developed and rolled out.
The media has been spinning a yarn that FF was asking for people who failed to pay water charges to have their debts written off. That was never the case and they have always said that the law should be obeyed, in contrast with SF and AAA who say that those who disobeyed the law should be rewarded. FF simply said that they would not write off those debts and repay money to others.
I am not re-inventing the wheel here. The countries that run a “highly competitive social market economy” (which all EU countries are, incidentally, committed to do under Article 3.3 of the TEU) have no problem in defining what equality means in specific instances. It requires, however, a level of honest debate which is, indeed, lacking.
On “inverted Micawberism”, cf my comment above.
In relation to “militant trade unionism”, the countries that are successful in running successful economies have a high level of trade union representation but which works in cooperation with management because there is a basic agreement on the need to be competitive, one vital element being that management is allowed to do its job. This basic agreement stems from the fact that the trade union movements are dominated by the manufacturing sector where workers are, normally, fully aware of the need to stay competitive.
If this description is uncannily like a description of Germany, this is not a coincidence.
Contrast the above with the Irish situation where the trade union movement is entirely dominated by workers in the employ of the state and where those in manufacturing may not be represented at all. The actions of the unions over the period of the crisis in ensuring that those in possession of jobs and pensions stayed in possession of jobs and pensions, if reduced, creating “no country for young teachers”, in effect a two-tier society now extending well beyond health.
No union involvement?
That the source of the fall of the Labour Party is not sought in this analysis is surprising to say the least. The explanation may be that the bulk of the money that has been borrowed, and which must be paid back, has been used to maintain a standard of living for those in society that remained in possession and it is better to let sleeping dogs lie. Public investment could, of course, take a hike.
Those left out are feeling legitimately aggrieved. How to fix the situation is now the problem. (It is, incidentally, far from unlike to Ireland and explains, in large measure, the political malaise impacting nearly all of Europe).
‘unlike’ should read ‘unique’.
The outgoing MOF breaks cover.
Fair comment – the set up charges seem to be ridiculously high. And I’ve always been deeply suspicious of the “commercial semi-state” entity. As taxpayers we get the worst of both worlds. We own them but have no control over them. They seem to be run for the benefit of their employees. My attitude would be – if we own them let’s have the Minister control them and demand pricing that suits the citizens.
However, I thought Keena’s point about cutbacks was well made- ie if we are in control of the budget, then they get cut in a recession – not what you want with infrastructure. So an independent entity with its own revenue stream looks good from that point of view. [of course, I also take point that current charges so low they’re a bit useless, but presumably they’d be bumped up in time.]
1. What do you see as a workable model? (specifically for the institution known as IW, not the charges)
while taking into account…
2. the Eamon O’Cuiv point and Richard Tol’s point that since the WFD demands full cost recovery and the high cost of sewage treatment means that that’s almost impossible to recover entirely from a water charge and therefore all EU countries have some form of subsidisation, then was it ever reasonable to assume it could stand alone?
btw on privatisation, I agree a referendum is drastic but I just don’t trust future governments when they need some fast cash. My proposal was something like a 4/5 majority in the Dail.
If we pay a fortune to set up IW I want us to own it – not fatten a calf for vulture funds in 10 years.
Irrespective of whatever shape of government emerges – if any – its members will have to accept a number of facts that will inform their decisions:
1. So-called independent economic regulation of commercial semi-states has proved unjustifiably costly and inefficient even when the charges and tariffs levied recover the excessive revenue allowed and final consumers and service-users, in most instances, are willing to pay them. It is totally inappropriate in the case of IW when the charges fall far short of the excessive revenue that has to be recovered, when the state seeks to plug the gap with various fiscal subventions, but refuses to allocate equity investment and when a significant proportion of service users are unwilling or refuse to pay the charges levied;
2. The 12-year Service Level Agreement with the Local Authorities’ water service divisions will have to be revisited and revised significantly;
3. Irrespective of how it might be reconstituted, IW will remain on the government’s books for the foreseeable future;
4. IW will have to be re-established as a new entity with a new board and senior management – and renamed – probably within the Dept. of Environment, Communities and Local Government (DECLG). It can be easily disentangled from Ervia because it has not been consolidated. The Local Authorities’ water sector assets gifted to IW (estimated by Eurostat to be of the order of €6-7 billion and which have gone missing) should be accounted for in the new entity’s books and it should be empowered to borrow in its own right.
Household water charges will have to be suspended until such time as the cost base of the new entity has been reduced to a level comparable with similarly sized water utilities on these islands and government subventions to part-fund capital expenditure will have to be treated as equity injections. If or when charges are suspended the amounts due from households at that point will have to be recovered or the amounts paid by households will be treated as interest-bearing deposits which will be drawn down to defray charges when they are re-instated.
The former ministers, Hogan and Rabbitte, who oversaw this costly mess are no longer in the Dáil. And it’s a shame that Tipperary’s voters extended Alan Kelly’s tenure, though he’s extremely unlikely to exercise any effective executive role. So it should be possible to wipe the slate (kind of) clean and re-constitute Irish Water.
Relax about the fast cash – the calf will be struggling to stand after ten years of losses and heavy capex. Only in Ireland can people get nervous that vultures are circling an outfit which will lose hundreds of millions per annum for the foreseeable future.
A feature of Ireland’s economic and administrative development is that it has hopped over stages in the development experience of other countries, largely courtesy of involvement with the EU and the influence of external, notably US, investment.
Another opportunity now presents itself, not by any action of the ‘establishment’, widely defined, but because a political impasse may force it to be availed of.
There is a lot of unruly behaviour in the EU classroom at the moment.
It is simply a matter of timing that Ireland is not involved.
There is another way.
However, assume that a FG/FF coalition comes to pass, will there be a repeat of the very dubious Economic Management Council experience? If there is, it will lead to the same result, no improvement in economic management and repeat breaches in expenditure ceilings.
The only solution is for each side to accept that it must sign up to a rigid budgetary ceilings framework. Which party holds the post of MOF then becomes of much less significance.
@Paul Hunt / Colm McCarthy
I will continue to pursue the hare of privatisation, down the rocky road, even if it takes ten years.
The last time the ECB came to town, they pretty much got everything they wanted. They will not be wearing soft slippers next time either, and the calf will have been well fattened at that stage, at public expense.
It looked like IW got all the infrastructure assets for water and sewerage, pipes, water treatment, the lot, for approx 127 million.
Its a potential goldmine, if only households would pay up.
hee hee. Point taken. I’m just still bitter about Telecom Eireann 🙂
You had me right up until the suspension of charges – I think that would be a disaster for a number of reasons
1. It shows the protestors they can win and they’ll just do it all over again next time. A lot of people are paying. We should build on that and establish the firm principle that water costs and the polluter pays. Fine – it’s not an economic payment – but it’s something.
2. It would be an outrageous slap in the face for those who did pay- and why should they pay next time? Also the FG grassroots will be beserk. It would be very damaging to FG internally to abandon charges as a price for power. And this stuff counts. The centre must hold etc.
3. Surely some income is better than none in the messed up finances?
But otherwise – on the corporate set up side, I’m getting there.
This is all we need!
Ballymena (from Irish: an Baile Meánach, meaning “the middle townland”.
Water isn’t a precious resource in Ireland. There are costs collecting, cleaning and distributing it. And costs on the crap-side.
I accept paying a charge for water, but it should be a fixed charge unless you’re using crazy amounts. I don’t want to incentivise people to poor hygiene just because someone some green party dude can’t distinguish Ireland from the Sahara.
The protestors were not and are not a homogenous entity. It makes sense to separate out the left-wing provoked rent-a-mobs and their fellow travellers. Nothing will ever satisfy them short of the ‘dictatorship of the proletariat’. The reality is that a large number of ordinary voters, who clearly had the support of a much larger number of voters who would give short-shrift the usual left-wing guff, took to the streets in October and November 2014. These are voters who really have to be provoked to take to the streets. One would have to go back to the PAYE protests of the late ’70s to see anything similar. And the Government panicked.
The Orwellian titled ‘water conservation grant’ of €100 was applied to bring the net cost to households down to €60 and €160 respectively for single and mutliple occupancy households. The fiction of the corresponding €160 and €260 charges per household was maintained to generate the €240 average per household that was needed to meet Eurostat’s market test that at least 50% of IW’s revenue was coming from household and commercial charges so that IW could be kept off the Government’s books. Last July Eurostat blew that nonsensical ruse out of the water.
The principal reason I would reluctantly accept the temporary suspension of water charges is that I sense a large majority of the TDs recently elected believe they have either an explicit or implicit mandate from their voters to suspend or abolish water charges. I would much prefer that this nonsensical ‘water conservation grant’ were abandoned and the basic €60 and €160 household charges enforced until such time as the necessary restructuring and re-establishment of IW is performed and a sensible charging regime put in place.
But that may not be possible.
Just as a further thought. There is this possibility – this is totally fantasy land.
FG and Labour could simply say to voters: “An efficient national water utility funded by efficient and equitable water charges is vitally necessary. But we got things totally wrong because we focused too much on satisfying the demands of selected, participating rent-seeking special interests groups in the sheltered private, public and semi-state sectors – and on increasing the ‘fiscal space’ so that we could bribe you with your own money. We’re sorry. We’ll work hard with all of the relevant groups and individuals to get it right this time.”
🙂 on Fantasy Land. It’s like spending lotto money isn’t it?
On the Conservation grant – agreed – it was stupid.
But on the hold-outs – well, I know you can’t generalise, but I think the rate of payment – 61% – isn’t bad at all considering the level of protest. Look at it this way- the TV licence (established, 1962?) has a payment rate of 85% I think. So a long established tax, with widespread advertising threatening aggressive penalties and including door to door inspections – and that gets 85%.
Water charges – in barely a year, the gov pretty much apologising for them, politicians assuring people there’ll be no severe penalties and widespread popular protest and it still gets more than half.
And hey don’t forget us culchies who have paid for our water forever (400,000 homes) are looking at the townies going, what is your problem? We pay the same income taxes and VAT you do and we pay for our water in and water out all the time.
You guys just need to get a grip and accept this stuff costs 🙂
btw – that 61% must include a lot of god-fearing Fianna Fail voters too.
The whole point is that the charge has to be levied in such a way that incentivises water conservation. (WFD) A flat fee means you can all keep flushing inconsequential wees away. Sure, have a generous allowance of water per person, but its like plastic bags. The less revenue taken is actually a sign that the policy is working.
In 2014 50% of the population including farmers on CAP welfare were in receipt of public handouts/ benefits. The typical farmer depends on welfare for 70% of his income.
That % excludes the many in receipt of corporate welfare and then there are professions — in 2011 the Dáil PAC said that the State was the biggest customer for lawyers spending about half a billion euros annually. There’s lots of public business for management consultants, medical doctors and so on.
The tax burden is relatively low at about 34% of GNP and only 40% of the private sector has an occupational pension.
Despite the lowest corporate and social security taxes in Europe, the business sector is constantly demanding more — a 10% capital gains tax will create a surge in entrepreneurship! — it’s a joke of course and after 60 years of State support, absent FDI, Ireland would vie with Greece for the title of Europe’s worst exporter.
Using the broad definition of social protection (public + private spending) — welfare, health, social housing (inc rent support), job-creation schemes, training etc — Ireland spends more as a ratio of economic output than other EU country.
On the spending side, there is a big dependence on public payments among professional groups and farmers but there is resistance to taxation.
Residential rates, water charges and property tax have been abolished in the past reflecting a resistance to taxes despite the socialist spending model.
Both Left and Right resist taxes but there is a consistent demand for the State to spend more.
Your question as to “the likely effects of turning a long run infrastructural investment vehicle, however poorly designed and implemented, into a short term political football” assumes that Irish Water was primarily conceived and constructed as ‘a long run infrastructural investment vehicle’ in the first place. It wasn’t.
Under the Memorandum of Understanding agreed with the Troika in 2010, the Irish government undertook “to complete an independent assessment of transfer of responsibility for water services provision from local authorities to a water utility, and prepare proposals for implementation, as appropriate with a view to start charging in 2012/2013.” As such, the objective of establishing a national water utility was envisaged primarily as a mechanism to ensure full costs’ recovery of water supply services, to achieve compliance with the EU Water Services Directive, and contribute to a restoration of fiscal stability. That it might function as an infrastructural investment vehicle was a subsidiary consideration, and was not referred to in the MOU.
Fine Gael’s proposal for a national water utility, as part of its 2009 NewEra policy platform and later in its 2011 election manifesto, was explicitly framed to appeal to its own electoral constituency: “Fine Gael will only introduce water charging after the establishment of a new State owned water utility company to take over responsibility from the separate local authorities for Ireland’s water infrastructure and to drive new investment.” Similarly, the Labour Party 2011 GE manifesto, ruled out introduction of water charges; whilst emphasising that “security of access to clean drinking water is essential for public health.” The 2011 Programme for Government commitment to establish Irish Water thus originated in the main from within the FG NewERA-inspired national development template.
The PFG 2011 makes no mention of a charging regime: “The new Government will create Irish Water, a new State company that will take over the water investment maintenance programmes of the 34 existing local authorities. It will supervise and accelerate the planned investments needed to upgrade the State’s inefficient and leaking water network so has proved so unreliable during the recent harsh water conditions.” By early 2013, the Government was advising the Troika of its intention to publish a Water Services Bill to provide for the establishment of a national utility and for the CER to determine a regime for the introduction of household water charges.
Thus for its domestic political audience, the government parties framed the establishment of Irish Water as a conservation/investment vehicle, omitting anything other than vague or ambiguous references to any water-charging regime. In its interactions with the Troika and the EU Commission, the establishment of Irish Water was framed as explicitly concerned with the introduction of household water charges. Politically, being duplicitous to that extent is all fine so long as you can get away with it. Political fear of grasping the nettle, which is that water needs to be paid for, was also reasonably based given the historical experience among several government stalwarts of popular opposition to the introduction of local taxes and charges.
The fact is, water charges have been a ‘political football’ since the mid-nineties. Schemes imposed by local authorities in 1994 were finally abolished by the then Minister for the Environment, Brendan Howlin, as and from 1 January, 1997, as the general election approached. The anti-water charges campaign in Dublin, which had many parallels with the more recent campaign against water charges, was led by Joe Higgins, who on foot of his activism in opposition to local charges had come within a hare’s breath of winning a Dublin West by-election in 1995. Higgin was subsequently elected to the Dail in 1997. As for ordinary citizens (including yours truly) who paid all such charges as they came due in the mid-1990s, they were left to reflect on their own folly in picking up the tab for people who really don’t believe compliance with legitimately imposed charges should have anything to do with them. The message from the establishment factions was also clear: ‘Tough luck on you paying those charges, you idiot! You can go whistle for your cash!’
Whatever the motivations or desirable outcomes to be achieved through establishing a single water utility, as it currently IW is a monument to political stupidity, duplicity and populism. Further, IW needs to be radically reformed rather than allowed settle into some ramshackle dysfunctional public sector organisation that will continue to lose 100s of millions of euros, and waste even more 100s of millions of taxpayers’ money, for several decades to come. Better to take the costs – however many millions – on board now, however big they may appear to be, and get it right so that investment vehicle and charging function dimensions will work to the intended purpose of delivering a high-quality, efficient water service over the long term.
Many thanks for this. Unfortunately it takes many words to spell out the cunning duplicity of the governing parties, of the academics who claim to promote public debate on policy issues but are cowardly and craven when it comes to engaging with the issues and of the various deluded left-wing populists. And the number of words causes eyes to glaze over. C’est la vie.
I’m against Irish Water for three reasons:
1 It is imposed by the EU via the Water Directive (unless I have misunderstood this). This isn’t given due prominence in the debates.
2 It is a wasteful and largely unnecessary bureaucracy which the country can well do without. Everyone seems to be agreed on this more or less.
3 Metering will cause people to cut back on consumption thus driving the costs up further (didn’t Richard Tol write about this in some detail here a year or two ago?), which will encourage people to be more careful still and lead to further price rises. That is sheer stupidity. Is this stupidity justified on conservation grounds?
Which of the above three is the most damning? They all are, aren’t they? Europe should take a running jump, an old-fashioned order of nuns would do a better job than Irish Water and the metering farce is ripe for a satirical novel.