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Compromise deal for NI Water could help avoid extra charges

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Last week's flooding has caused a lot of anger with NI Water

Last week's flooding has caused a lot of anger with NI Water

Last week's flooding has caused a lot of anger with NI Water

The Northern Ireland Executive has popular support for its stance on no extra water charges.

The present working arrangements for the water supply industry here are superficially (and deceptively) comfortable for domestic water users but the systems do not give adequate incentives for more efficient management and investment.

Last week's heavy flooding, in areas often already known to be vulnerable to flooding, has attracted public anger. Not enough was done to ease the hardship. However, no improvement in the performance of call centres could have avoided the problems. The real problems are the capacity of the infrastructure for water and flood management. An investment programme on a much larger scale than is currently available is unavoidable.

The pain and expense of flooding will recur. Only a better investment programme will make it less painful. As Regional Development Minister Danny Kennedy acknowledged, the present financial management arrangements for Northern Ireland Water (NIW) are not fit for purpose. Now, as the floods disappear, temporarily, some new plans for NIW are needed from the Executive.

This is, at this stage, not a plea either to privatise water or to introduce extra revenue from domestic charges. There is a possible compromise on the immediate financial issues relating to water supply and management which would also accept the Executive policy of no extra new charges.

The Executive could agree that NIW would be financed, in total (with marginal adjustments) from part of the revenue collected from the Regional Rate which would be explicitly split.

The purpose of the change would not be to simply rearrange how funds are made available. It would be to give NIW and domestic customers a realistic set of incentives to improve the organisation and its capital spending. Properly designed, the revised arrangements would give NIW access to external borrowing.

As from, say, April 1, 2013, the rates bill for all householders would be reduced by an agreed fraction to release sufficient funding for the operational budget of NIW. Initially, the reduction would be proportionate to rateable value, scaled to approximate to the hidden cost of water services. In year one, this money would be transferred to NIW instead of a subvention through central government.

In year two, the reduced regional rate would then sit alongside a water services charge, separately levied on each household.

Then by year three or later, each domestic household would be asked to have installed (possibly with an attractive offset for the cost) a domestic water meter and each household would convert to a water charge based on measured usage along with any allowance for low income households. The incentive would mean that water supply would be treated, as it should be, as a valuable service.

There would be some gainers and losers in year three and a phasing in for what should be small adjustments would be needed. The important improvement would be that NIW would become a real trading organisation with real incentives in its supply and marketing.

To those who need to be persuaded, they must be shown details of how Israel has improved its systems and, closer to home, study the example of the steps now being taken by the Irish Government to modernise the Irish water supply industry and linking that with the universal installation of water meters.

The Irish Government has moved quickly to restructure its water services against a background where the Irish infrastructure is even less adequate to this century than the infrastructure in Northern Ireland.

The real benefit should come in the financing of the capital budget. NIW would cease to be part of a Government department and would be financed on a standalone basis.

Admittedly, this is only a compromise proposal: it avoids the addition of EXTRA water charges.

Households would potentially be slightly better off. NIW would be better motivated to meet viability tests. Any takers?