GREATER CLARITY is required about the Government’s plans to establish a national water authority and to introduce charges for domestic water services. In Dáil exchanges last week, Minister of State Fergus O’Dowd “presumed” that water charges would not be imposed until the metering of all homes had been completed – work that may continue into 2015 – while the terms of the bailout agreement with the EU-IMF provide for the introduction of charges by 2013. If a gap of two or three years materialises, State revenue that would have come from water charges will have to be found elsewhere.
Charges for domestic water were abolished in 1997, although commercial charges remained. That decision caused a further narrowing of the tax base and impacted directly on local authorities. As with the abolition of rates in 1978, it was a populist decision that transferred some of the burden to businesses and weakened the link between the electorate and local councils. The financial bailout agreed by the last government requires that both forms of taxation be reinstated.
The new programme for government commits to the establishment of a commercial State company, Irish Water, that will take over responsibility for water services from all 34 local authorities. Mr O’Dowd suggested the task of fitting more than one million water meters to houses and apartments could take three years and will not start until legislation is in place. That may not happen until late next year. Unless a flat-rate charge is introduced, the suggested timeframe could delay water charges until after the next general election.
In view of the political cowardice displayed by the main political parties on these issues, requirements by the EU-IMF were helpful. For decades, national and international experts identified the need for a broader tax base and were largely ignored. Prompted by the Green Party, commitments to property and water charges were finally made by the last government, but their introduction was delayed until after the election.
The OECD, the ESRI and the Irish Competitiveness Council have all identified these taxes as being sources of income for necessary investment and the repair of the public finances. An alternative approach will involve higher taxes on income, which is likely to damage competitiveness and act as a disincentive to work. No matter how politically unpalatable these decisions may be, Government Ministers had better swallow hard and do what is best for job creation and the wider economy.