There is a classic syndrome in much organizational strategy which is called “escalation of prior commitment” . This is also known as ‘throwing good money (or political capital) after bad’. Sometimes the thing to do is – stop. The government should now pause the Irish Water omnishambolic clowncar, rethink and regroup.
Lets look at the finances. At a sectoral level it costs of the order of e1.2b per annum to run the water system. Water needs to be harvested, treated, delivered; sewage needs to be collected, treated, discharged; the system needs to be operated and managed. Right now a large part of the problem is that the doing of all this is spread across literally dozens of local government bodies. This is inefficient. Water and sewage in a modern European society are, at least at the infrastructure level, a natural monopoly. There are likely to be significant benefits from operating the whole system as one. It needs therefore to be funded.
A second issue is that over decades we as a nation have not invested in the system. The consequence is that upwards of 40% of water is believed lost in transit, through the cracked and disjointed infrastructure, a physical counterpart to the organizational mess. This is considerably above what is the norm in European countries. Significant investments, several billions over the next number of years, are required to get this sorted. So water costs, and will cost. It therefore has to be paid for.
This is where it gets tricky. At one level the creation of the Irish Water we have now is a consequence of the banking mess. The need to invest requires that money be spent. To borrow that money someone has to back it. That, in 2010, couldn’t have been the Irish State, broken on the wheel of the calamitous banking collapse. So, a commercial semi-state, like the ESB, which got more than 50% of its revenue from the sale of goods and services, that could borrow away on the strength of the income flow, and the debt be kept off balance sheet. In a nutshell that is why we have the structure we have. The Troika cant be blamed however for the abominable way that it has been managed and presented ; the debate on the need for (or even the legality of) demanding PPS numbers, the “its not a bonus coz we called it something else” debacle, the goldplated consultancy spend, the Coolidge like silence of the CEO, the astonishing cost of callouts…these are all our own work. So, do we need the damnable thing now , do we still have to keep it off balance sheet?
This argument may no longer be valid. Its time for Alan Kelly to be courageous, take a cold look at the mess, and call a halt.
First, it is unlikely that in the short to medium term 50% of income will come from charges. I still haven’t gotten my forms, and I am amongst tens, perhaps hundreds of thousands, who have not. Less than half the customer base has returned the consent to charge form. Unlike the household charge there is a very widespread civil disobedience combined with a massive failure to allow those like me who wish to be obedient to be so. So this year the e300m IW hoped to get is as unlikely as Carlow winning the Liam McCarthy cup.
Even at full tilt, were everyone to sign up and pay up, a minimum of e500 per household is likely to be the required take to ensure that over 50% of requirements are met ‘commercially’. While that may well be ‘modest’ in absolute terms or even when viewed from the perspective of a cabinet minister, it is still a tenner a week, and so will have a disproportional impact on the lower paid. Revenue statistics suggest that upwards of 360,000 persons have income of less than e10k (as of 2011). If you are on e200 a week such as they are then e10 is the difference between white mince and cheap mince; for a cabinet minister earning e3000 per week it is utterly irrelevant. So, Irish water is unlikely to wash its face.
We are told, and there is some considerable truth to it, that we have as a nation turned the corner. Some modest domestic bookbalancing combined with the realistic Draghi at the helm of the ECB has resulted in a collapse of yields on government debt. It is now ridiculously cheap to borrow. The government should take advantage of that and borrow up to e5b to properly, once and for all, fix the water system. After all, in an environment where gross national debt is hovering at 200b it is farcical to think that a meaningful infrastructural borrowing of 2.5% more will attract any negative reaction.
Parallel with this being spent on fixing the system a complete and comprehensive rollout of metering should be undertaken. It is symptomatic of the shambles that is IW that they still have not gotten a handle on how to meter apartments and have no idea when they will. Meter the dwellings. For a year or two tell people how much this WOULD have cost them. Inculcate a sense of water as a finite resource we use while fixing the system. Then start charging.
A survey by Amarach in 2013 showed that only 16% of people wanted to continue to pay for water via general taxation. So, provide and let people know well in advance, a sensible charging system. That will involve a small standing charge (of about e100 per annum to repay the interest on borrowings for infrastructure) and a modest per liter charge which doesn’t rise as usage falls. Meanwhile, put a proper, modest public service utility model in place for the management of the system, not the present bloatocracy.
Water costs. Infrastructure costs. Lets face that, spend the money, put in a system that is fit for purpose, and then roll out modest charges that amortize the capital cost , cover a large part of the running cost and incentivise sensible water use.
This is a version of a column in the Irish Examiner on Saturday 25 October 2014