Irish Water abolition ‘would cost State up to €7bn’

The abolition of Irish Water by a new government would cost the State up to €7 billion over the next five years, according to internal estimates by the State-owned utility.

The estimates envisage the losses occurring under four categories: cash costs, sunk costs, benefits forgone and the lost possibility of getting its debts off the exchequer’s books.

With Ireland’s water and sewerage infrastructure in need of a multi-year investment programme costing well over €500 million a year, the issue will have a crucial impact on the incoming government’s ability to spend money on public services and/or tax cuts.

The cash costs have been estimated at about €100 million, and largely involve paying off staff who would not be transferred to local authorities. It would also include the cost of breaking leases and contracts, and the costs of transferring back the property already put into Irish Water ownership.

Sunk costs are categorised as expenditure the value of which would be lost if the company was abolished or water charges ended. Some €500 million has been spent on the metering system, and another €170 million on establishing the financial, procurement and customer processing systems that Irish Water uses.

The benefits forgone are the domestic water charges valued at €1.6 billion that would be collected in the period to 2021, and a further €1.6 billion in savings that are part of the utility’s business plan to 2021.

State balance sheet

The final issue is whether Irish Water’s borrowings could be kept off the State’s balance sheet, something that is decided on in Europe.

At present the utility does not qualify, in large part because of the Government’s decision to give people water conservation grants.

Without water charges, the utility cannot pass the Eurostat test. The achievement of savings, and an increase in domestic customers paying their water charges, which stands at about 63 per cent, will be key to passing the Eurostat test. Late-payment charges begin to apply from July.

Minister for Agriculture Simon Coveney told RTÉ's Prime Time last night that Fine Gael will certainly be willing to talk about water during negotiations on the formation of a new government.

Fianna Fáil has said, if in government, it would abolish the controversial company and suspend water charges but the move could see hundreds of jobs being lost in party leader Micheál Martin’s constituency. About 400 people at Abtran’s Cork facility are involved in providing outsourced customer services to Irish Water. Direct employment losses at the utility would be about 500 but a shared services centre in Cork, used by Irish Water and Gas Networks Ireland, would also be likely to let some 100 staff go if the company closes.

Sinn Féin also campaigned on a policy of abolishing Irish Water and water charges. Its newly elected TD for Dublin Bay North, Denise Mitchell, on Tuesday said her party stood on a platform to abolish water charges and it would be a priority in the new Dáil. Newly elected TDs from smaller groups and parties have also supported abolition of the utility.

With Irish Water already taking central control for such issues as procurement, insurance, and an investment plan for a fully mapped water and sewerage system, some experts question if the abolition of the utility was possible. “It would be like putting the toothpaste back in the tube,” said one.

They also pointed out that abolition of the charges would put Ireland in breach of European rules on the water framework directive and Europe’s “polluter pays” principle. The potential fine for such a breach could be in the region of €120 million.