Eurostat is the EU’s statistical agency and so, as you would expect, a lot of its assessment of Irish Water is based on figures and accounting.
But you don’t have to read between the lines to realise that, in assessing whether Irish Water was an agency independent of Government, it felt that it comprehensively failed “the duck test”.
As the old saying goes, if it walks a duck, swims like a duck and quacks like a duck, then it is a duck. And when it looked at Irish Water, Eurostat found a body whose board was appointed by Government, who had to seek the approval of the Minister to do a lot of things – and whose charges to domestic customers were more or less set by Government diktat.
Many of the overall figures in the report are redacted, but Eurostat does point out that, through one channel or another, Government this year will fund €730 million of the €900 million of Irish Water costs. “This constitutes a massive financial support,” as the Eurostat letter points out.
The problem for the Government is that many of the decisions it took last November to defuse the anger over the water protests are the very ones which Eurostat takes issue with.
It believes domestic customers should be asked to pay more and queries in particular the cap on fees. It does not accept that the €100 water conservation grant to be paid to households is separate from Irish Water’s finances, as the Government argues.
For all these reasons, and due to questions over the treatment of planned capital investment costs – which Eurostat feel should be higher – the statistical agency calculates that Irish Water fails the market corporation test.
To pass, more than half its revenues must be commercial.
The CSO calculates that it should have passed, with a ratio of 54 per cent. Eurostat does not agree. It presents a range of possible figures, depending on what assumptions are made, of which the highest is 48 per cent and the lowest is 27 per cent.
The tone of the report is that it feels Irish Water is a long way from meeting the rules and that Government attempts to tweak the whole arrangement to just sneak in under the rules have failed.
The CSO has said it will discuss the key areas of disagreement and given that it is new rules that are being interpreted here, it may make some progress.
However there is a long way to go and the bigger questions are for this Government - and the next one. The problem facing the Government is that to pass the test, consumers will have to pay more (perhaps via the elimination of the €100 charge) and a high rate of payment will have to be achieved.
Irish Water’s contention to Eurostat that most of the arrears building up will be collected within five years seems, to be charitable, highly optimistic.
The latest economic growth figures suggest that taking Irish Water on to the State balance sheet is not going to cause any problem in meeting EU deficit rules this year or next. Consumers will also reckon that, in the long run, we will all pay for water investment either, via charges or general taxation.
But the structure of Irish Water as an independent public utility is now in serious question, with long-term implications for government budgets and for its investment programme and its funding. A big question for the general election campaign now is how to fix all this.
