The introduction of metered water charges for households could raise €200 million for the State's local authorities, the Department of Finance argued strongly last year during Budget 2003 negotiations with the Department of Environment.
However, the measure was strongly opposed by the Minister for Environment and Local Government, Mr Cullen.
The Minister said he had rejected the proposal "out of hand" when it was proposed by Finance and by the Government's Expenditure Review Committee.
The Department said in a paper published in yesterday's Sunday Tribune that it would have to find €1 billion to meet the cost of water and sewerage services between now and 2006.
The annual cost to the Exchequer will have risen to €385 million, 69 per cent of the total bill, by 2008, according to the Department of the Environment's own figures.
The Republic is the only country in the European Union and the Organisation for Economic Co-operation and Development not to levy domestic water charges, which were abolished here in 1996.
Until then they had raised €60 million annually for local authorities, except Dublin and Limerick Corporations, which did not have them.
However, the difficulties associated with service charges have been graphically illustrated by Dublin City Council's failure to agree a 2003 budget because of the refusal of the majority of councillors to support a plan by the City Manager, Mr John Fitzgerald, to raise €16 million more from refuse charges.
"As drinking water quality and sewerage treatment requirements become more stringent and water and sanitary services become more expensive to provide and operate, the absence of a charging regime on domestic customers could put unnecessary and avoidable pressures on the Exchequer." said the Department of Finance document.
"Moreover, the long-term objective in relation to a water and sewerage service should be to encourage more sustainable patterns of consumption rather than simply recouping the costs of delivering the service.
"The absence of a charging regime could contribute to inefficient use of what is becoming an increasingly expensive resource," said the Finance paper, released to the Sunday Tribune under the Freedom of Information Act.
Urging the Government to announce a €200-a-year water charge "for all households from a specified future date", Finance said all new houses granted planning permission after January 1st should be fitted with water meters.
"An incentive could then be offered to households who opt to install a meter and to pay for the amount of water consumed rather than the flat rate," said Finance, which added that it would cost €250 to install an internal meter, or €500 if one had to be installed outside.
Although opposed to water charges, the Minister for the Environment has established a two-year review of the local authority system which could, sources say, lead to tax-raising powers for local authorities.
