We should not under-estimate the impact of the Eurostat ruling. It completely removes the rationale for Irish Water and the water charges. After Eurostat, there is no policy, no direction, no strategy. Ministers will downplay the ruling with a ‘move-on-nothing-to-see-here’ rhetoric, punctuated by a ‘there-is-no-alternative’ but all this does is expose the inability to grasp how fundamentally the landscape has changed.
Eurostat was never going to rule in any other way than it did. The Government admitted this last April in the Spring Statement when it put all water expenditure back on the books in its projections up to 2020. The fundamental issue is not whether enough people paid the charges. It was the ‘market corporation’ rule: did Irish Water look like and act like a commercial company in a market economy? Eurostat said no – and this is all down to the Government’s headless-chicken response after the mass Right2Water protests last October and November.
The Government capped charges, froze them until 2018, and introduced an indirect subsidy through social transfers (the water conservation grant). The lack of ‘economically significant prices’ (i.e. charges that reflect the cost of producing water) and government control led Eurostat to rightly label the whole exercise as a mere reorganisation of non-market activities. Given all this, what company in the world could be considered a market entity?
The main rationale for the Government’s water policy was not charges; this could have been introduced as a stand-alone revenue-raising measure. Nor was it the creation of a single water authority; that could have been done as a public agency rather than a corporation. The over-riding issue was to take the estimated €5.5 billion of desperately needed investment over the next seven years ‘off-the-books’. Everything flows from this: to take investment off the books you need to create a corporation, you need to charge a ‘market-like’ rate for the service.
Remember those lectures from Government Ministers and commentators with that ‘common-people-just-don’t-understand’ attitude? Without the investment there would be water shortages while we would all be walking through sewage. And the only way to get this investment was through Irish Water and charges.
Eurostat has killed that narrative. Investment will be on –the-books. With that foundation removed, the edifice – and the rationale for that edifice (the corporation, the charges) – crumbles.
What now? Whatever they say in public Ministers must know its game over. The only way to pass the Eurostat test is introduce ‘economically significant prices’. This would mean reverting to prices based on usage with no cap determined by an independent regulator. Is that likely? No, not with the potential to bring another 100,000 to 200,000 on the streets. The people didn’t win many victories during the austerity days; they won the battle over uncertain charges, PPs numbers and cut-offs. No political party is going to challenge that.
How do progressives react to this? The safe ground would be to call for the scrapping of the charges and the reform of Irish Water. Fianna Fail is already calling for that. Progressives can and must go further. We can’t effectively challenge the current ‘steady-as-it-goes’ Government approach with a ‘steady-as-it-went’ that dominated past policy. We need creative and innovative thinking that can not only address the issues but present an exciting, inclusive alternative to water supply and all public provision.
We need to increase investment to €600 million annually to modernise our infrastructure.
Water investment has been a bit of a roller-coaster ride. We are now slightly ahead of 1995 levels after peaking in 2008. We need to do better.
The New Fiscal Framework published by the Right2Water Trade unions shows how. Based on Government projections and modest increases in capital and wealth taxation (along with increases in the social wage), public investment can be doubled by 2020 to between €6 and €7 billion a year by 2020 with leeway to go further.
Prior to the crash, water and sewage investment made up 11 percent of total investment. Based on the New Fiscal Framework projections, water and sewage investment would easily rise to the needed €600 million. There are two points here:
- Some commentators rightly state that governments can change priorities and, so, reduce investment. That was one rationale for a commercial Irish Water. However, this argument could be applied to any other public spending category – broadband investment, health and education expenditure, pensions and social protection payments. These are political choices and to ensure the needed resources for water and sewage we need to elect a government which will pursue investment-driven economic policies.
- Secondly, €600 million annual investment is a gross figure. As the Nevin Economic Research Institute has shown, the net cost is far less when you take into account the impact on employment, domestic demand, growth and the resulting tax revenue. The actual net cost would be half that amount.
Increasing investment is not a fiscal or economic issues – it is a political issue.
From Dog-Day Irish Water to World Class Public Agency
Irish Water should now be transformed into a new national public agency sans all the charges, billing, collection, and off-the-books machinations, save for current business charges. A working title could be the National Water Authority (NWS). A single water agency it can engage in national strategic policy while capturing the benefits of economies-of-scale. It is also less capable of being privatised since it doesn’t operate on a market basis charging for water. But we can go further.
- We could charge the agency with developing energy renewable resources from the use waste treatment. There is a history throughout the EU (especially Austria) of using waste as renewable energy sources while there have been new technological developments in this area (see hereand here). The new NWA could be charged with rolling out R&D and renewable technologies appropriate to Ireland.
- The new agency could become a national and international leader in water conservation. Our public enterprises already do this. Bord na Mona (which probably would have been a better fit for water policy than Bord Gais) was developing water conservation, management and consultancy programmes before Irish Water while ESB International shows that even a small public company can regularly beats out much larger, private energy companies in winning contracts in other countries to install, design and manage energy plants.
These two measures would generate revenue over the long-term and, so reduce water and waste supply costs. But we can go further still.
- NERI has proposed a programme of energy retrofitting; in particular for second-hand houses when they are being bought and sold (so less disruption for occupants) which would part be of a New Green Deal. We could complement this with water conservation retrofitting with current technologies (e.g. dual-flushed toilets, repairing pipes on private premise) and new technologies (e.g. grey water usage, rain capture, etc.). This could be funded on a long-term basis through the European Investment Bank or the new European Strategic Investment Fund.
And finally, how about a new democratic dispensation? If public enterprises and agencies are truly ‘public’, meaning ‘ours’, why shouldn’t there be popular elections of consumer directors to complement the election of workers’ directors on their boards? I will develop this in a subsequent post, but a democratic innovation could be ESB customers electing 2/3 consumer directors; ditto for RTE. So why not elect consumer directors’ on the new NWA? This could start to recapture the ‘public’ in public enterprise and agencies.
Progressives should take up the opportunity that Eurostat has given us – to radically rethink in new and innovative ways of how we do public business. In this way we can recapture the excitement of nation and economy-building that took place when people came out to offer cups of tea and cheer the ESB workers as they brought electricity to towns and villages throughout the country – pole by pole.
Pipe by pipe investment, conservation and renewable energy, a player on the international stage, incorporating new democratic inputs – we can transform our water utility from a dog-day corporation to a reinvigorated public agency fit for people’s purpose in the 21st century.
At the end of the day, Eurostat has done us a favour.