Saturday, 1 November 2014

The Issue is Income Adequacy not the Price of Water

Nat O'Connor: If ten families on a hillside got together and built their own water supply, and had to pay to monitor and treat every litre to keep it drinkable, they would make damn sure that no one was wasting water.

The common ownership (and cost) of the water supply, shared among a small pool of people, should provide sufficient incentive for everyone to watch their water usage. But if the scheme expanded to new people who didn't share the same sense of collective effort, they would install meters so that people would see the evidence of their water usage and charge people according to use.

But such a scenario only works if everyone involved has an adequate income to be a participant. That's the problem with introducing water charges in Ireland right now: far too many people have inadequate incomes relative to the cost of meeting their basic needs.

Ireland spends €1.5 billion per year on clean water and waste water (Eurostat figures for Ireland). That's half the size of the annual primary school spending of €3 billion. It's expensive, and we are not investing enough to provide for our future water needs.

There is nothing wrong with using pay-per-litre metering to keep the overall cost down, which saves everyone money. But the introduction of this policy has gone wrong in Ireland.

Firstly, there is no sense of water services as a collective resource belonging to everyone. To say the least, the creation of Irish Water did not recreate the optimism and collective ambition of ESB's Rural Electrification Scheme. Partly, this is because successive governments chose the politically easy option of claiming that this was an unwelcome measure foisted on Ireland by the 'Troika', rather than an opportunity to save many millions of public money lost through leaks on private property.

Secondly, the high wages and cash incentives in Irish Water are out of touch with a population that has been badly bruised by years of austerity. Irish Water looks and 'quacks' like a private for-profit enterprise, even if it is a public utility and the Government denies a plan to privatize it.

Thirdly, and most importantly, many people do not have the cash to pay for water. They just don't have it. Deprivation has risen from 11.8% in 2007 to 26.9% in 2012. Many people are going without all sorts of essential goods. Another €10 or €20 per month in other times might be affordable, but it's not right now.

And there is uncertainly about the full cost. People are wary of the meter ticking. Those with older appliances or dripping taps they can't afford to change are worried about excessive bills. Many people do not have the money to repair leaking pipes and cannot afford the credit for water-efficient white goods.

What to do? The politically easy option is to say that it was all a misunderstanding and we'll put the genie back in the bottle by scrapping water charges.

But the real problem is income inadequacy - too many people have low incomes when compared to the high cost of living in Ireland. The answer is not necessarily more cash, but possibly more free-of-charge services that would reduce people's cost of living, and free up disposable income.

But, by that logic, why not free water? The reason is the strong evidence that water is more efficiently delivered as a pay-per-litre public service, whereas health services are most cost-effective when they are tax-funded national health services. If we could swop free-water and €60 GP fees for free-of-charge GP visits and pay-per-litre water, we'd get just as good services for a lot less public money.

We need to keep our eye on the prize, which is €1 billion of savings over five or ten years. That money could be invested to create jobs, or it could be spent on other public services, or it could be used to reverse some of the cruelest welfare cuts of the austerity period.

And it is not the bonus-driven incentives for Irish Water executives that will produce most of those savings. It is through the public collectively conserving water and fixing leaks that will save the public money.

If we abolish water charging, we will go back to paying for it from VAT and income tax. We will all still be paying, but there will be no metered bill to stop wastrels from taking a far greater share of our shared resource. So not only will we all pay through income tax and VAT, but we'll pay more in total than we would pay through charges.

If the water protests are successful in their own terms, water charges will be scrapped. But this will have the unintended consequence of restoring a system that allowed leakage and waste by some property owners and landlords, which will be paid for by the rest of society.

And the added pressure on tax revenue from paying for water will widen the deficit and make Budget 2016 a good deal more harsh that it would otherwise need to be.

The alternative to all of this is for policymakers to make a much great admission of misjudgement about how water charging has been handled so far, and to go back to the drawing board to design a water charging system that is transparent and strongly equitable, with targeted support to people on low incomes, so that everyone can afford to pay for water.

And about that €1 billion of savings. What is the public going to get from adopting a system that will save some of our money that was previously spent on wasted water? How about a bonus for everyone?