Wednesday, 7 May 2014

An Equitable Solution for Water Charging (and Leaks)?

Nat O'Connor: We now have more detail about the Government's proposed model of water charging. Minister Phil Hogan called water charging "“one of the biggest decisions this government will ever make” (Journal.ie). But is it equitable?

One important issue for equity is the detail about when people must fix some of their own leaky pipes.

Water charging is a culture change and it will make more people aware of the cost of public services. But given the enormity of other Government decisions - like increasing VAT or cutting back on public services to a much greater extent - paying differently for water is not such a big deal. We already pay over €1 billion for water (through income tax, VAT, etc.) so paying via water charges is just a change in how we pay.

The deficit in the Government's finances is still enormous, around €12 billion, so if water charges weren't introduced, there would have to be other tax increases anyway. In that context, introducing water charges is a genuine example of real public service efficiency as the fact of charging people for water makes us less likely to waste it - thus saving us all public money that is currently spent on clean water that is leaking out of the system; much of it on private land. And we can only find the private leaks in the system by installing meters and introducing the reality of fix-or-pay for property owners who have not maintained their pipes. (In the long term this is probably good for these owners too, as leaking pipes are going to cause rot and rising damp, which could take tens of thousands off of the value of their property - so a nudge in the direction of repairs is no harm).

The issue of water affordability is a different question, which TASC has addressed through its equality-proofed proposals for Water Credits.

But the major cost of water charges in the early years is not going to be the charge for using water. Rather, it will be the property owners' costs to fix their pipes.

Minister Hogan's press release had this to say about the 'first leak fixed free' part of the water charging policy: "An additional €200 million over 2 years for Irish Water’s capital investment - to include a free first fix scheme, providing each household with a free fix of the first leak on a customer’s water supply pipe. Irish Water will be outlining its proposed capital programme, subject to CER approval, in the coming weeks."

The important words there are the "water supply pipe". This is, presumably, the section of pipe from the meter to the house that delivers the fresh cold water. But how far does it go before it becomes an 'internal' pipe? Will it go as far as the kitchen sink? Or to the water tank in the attic?

To achieve equity in the water charging system, we do not want public money being spent on digging up and putting back really expensive kitchen tiles, printed wallpaper or the like. Property ownership has its responsibilities as well as its rights. This will be the real equity test, as politically and economically more powerful, wealthier households may seek to access public money to fix their leaks, rather than taking personal responsibility and paying to fix their own pipes. And if interior fittings or even an expensive lawn or paving have to be replaced at public expense, you can bet that it will cost much more to fix the pipes belonging to wealthier households than those on lower incomes.

For people who are 'cash poor, asset rich' (such as pensioners on a fixed income who own their own home), there may need to be a scheme to fix the leaks and recoup the cost years later if the property is sold or from their estate upon decease. Local authorities should be well placed to deliver these repairs, but someone will need to finance it for the intervening years. However, the Local Property Tax law provides a deferred payment mechanism that could perhaps be used to carry and recoup such costs - although its punitive interest rate should be lowered.

Low income households will be in trouble if they cannot afford to fix leaks. Many people on the lowest incomes rent, rather than own property. So there will need to be measures to coerce landlords into fixing pipes, so their tenants are not faced with exorbitant water bills.

1 comment:

Ray Geoghegan said...

I work for a Leak Detection company and wonder does the minister plan on finding the leak for the customer as well as fixing it. A lot of times the more costly part is locating the leak, but then when done correctly reduces the amount of digging.