There seems to be no end to the political embarrassment Irish Water can cause this Government. The latest ruling from Eurostat, that the State spending to support the company must remain on the exchequer balance sheet, runs contrary to one of the key goals when the company was set up. It is possible that in the years ahead the goal of establishing Irish Water as an independent company can still be achieved, though it will be up to the next government to decide whether this should happen. The large non-payment campaign of water charges greatly increases the political challenge of doing this.
The Government cannot do much more than grin and bear it. There has been a catalogue of errors in the establishment of Irish Water, both political and administrative. That said, the initial goal to have water services managed by one agency and to get consumers to make a contribution remains sound. A number of parties will stand in the general election calling for the abolition of water charges. But if the money for investing in water infrastructure does not come from users, then it will come from general taxation. One way or another, we pay for it.
The only saving grace for the Government in the latest development is that, despite hoping that Eurostat would accept its case, it decided to include the figures in its budget planning for 2016 and subsequent years, as outlined in the spring statement. So the ruling may not make much difference to Budget 2016but the goal of creating a long-term stream of funding, independent of the exchequer, to finance water investment has been dealt another blow.
The Irish Water saga has damaged the Coalition’s reputation for competent management, even if some of the controversies were overblown. Crucially, the initial establishment of Irish Water was not done with the aim of starting out as efficiently and cost-effectively as possible. And the Government’s political handling of the water charges controversy was poor, first being too slow to recognise the fear of some households that they would face high bills, and then backing down with a messy compromise which undid some of the initial objectives.
In the light of the Eurostat decision the Government has to decide on the appropriate long-term structure and funding model for Irish Water. But a more fundamental political issue has opened up too. Large numbers of people have not paid their first bill and the Eurostat decision will embolden the protesters. The Government has decided not to pursue offenders, for the moment anyway. Against this backdrop, are domestic water charges a sustainable proposition? This issue will be fought out during the general election campaign. It is to be hoped that all sides start from the proposition that water investment cannot pay for itself.