Belfast Telegraph

NI Water facing a tough squeeze on its revenues

By John Simpson

Any anticipation of the next budget decisions for Northern Ireland departments is depressing. The Department of Finance has published its best assessment of the bleak budgetary outlook for the period 2018-20.

It's constrained by Treasury estimates of the allocation coming through the Barnett formula. It is measured in terms of money available and must, therefore, be corrected to allow for the erosion of spending power caused by inflation.

NI Water is in an unusual relationship with this budget arithmetic. NI Water has already been tested for operational efficiency by the Utility Regulator in a price control which has set out tight limits to the revenue budget. There is now a potential crisis because the budget prospects set by the Department of Finance for current spending allow, in the first option, £7m less each year in revenue than has already been approved by the Utility Regulator. The gap is even higher under two other options.

If the Department of Finance allowance over-rides the target set by the regulator, NI Water is faced with a continuing revenue squeeze that is then cumulatively amplified by the budget limits. At best, this is double jeopardy; at worst it is impossible to match these limits and deliver the standards set by independent regulation.

The challenge of avoiding that budget reduction raises wider questions to which we return to below. To no one's surprise, NI Water has set out its fears of the consequences if the reduction is legally enforced, although ethical or legal merits are separate issues. An inability to maintain sustainable supplies in some circumstances is the first concern. Other experts have already set the standards and framework for maintaining fresh water supplies and the treatment and disposal of waste water. Unpredictable periods of water being cut off can be anticipated but not accurately predicted. In addition, flood incidents from overwhelmed sewers are more likely.

In short, the budgetary prospects, if realised as predicted, will breach the current arrangements whereby adequate safe standards are a basic constituent of the Regulatory outcome.

Instead uncertainty and unreliability will be more likely.

In the years ahead, NI Water is charged with advance planning for water and sewerage services that meet the high standards that households expect and also offer standards that visitors, investors and new modern industries expect.

A major illustration of the future planning needs is the already assessed particular deficiencies in the Belfast region for which a £750m 'living with water' investment plan is in preparation.

The document setting out the budgetary outlook is most useful if it provokes a well-informed debate about alternatives avoiding these unwelcome outcomes.

NI Water would prefer to be allowed to tackle the demands already in place as accepted by the Utility Regulator. In NI we have public sector ownership and funding.

Now is not a likely time to talk about privatisation but there are other intermediate options meaning that households would face more realistic payments (via a rates addition).

Focusing this debate only on financing NI Water is too narrow a focus. Within the UK, NI is funded on a defensible devolution mechanism. From that starting point there is a case to review the options to find public spending savings internally in the NI budget.

There are many suggested options, not necessarily popular. In several examples, local spending is, proportionately, higher than in GB.

There are obvious examples.

Will the problems for NI Water be the starting point for debate about sensible alternative choice decisions?

Company report: Andras House

The Andras House group is a combination of a major property company and a group of hotel and hospitality businesses in Belfast, controlled by Lord Rana and his family. 

The group is owned by Greystone Ltd (IOM), a company registered in the Isle of Man.

The company owns six hotels operating under franchise arrangements in the greater Belfast region. 

They include the Ramada Plaza (now rebranded the Crowne Plaza) at Shaw’s Bridge, the city centre Holiday Inn (in Great Victoria Street), the Ibis Belfast (close to Queen’s University), the Ibis Belfast city centre and the Cordia Apartments (Lisburn Road).

The group will soon open a new hotel, Hampton by Hilton, which is under construction. It’s the first Hampton by Hilton  in Northern Ireland.

At the end of the financial year, April 30, the group had capital commitments for a further £10.5m.

The year to April 2017 reflected a continuing increase in turnover and improving profits. Turnover and profits increased sharply compared to the preceding years.

The increased operating profits in 2016-17 were achieved after the deduction of an exceptional item for impairment of development property of £1.1m.

In the most recent year, the balance sheet value shareholders’ funds have continued to improve and were on the books at over £54m in April 2017.  

In the most recent year, dividends to the shareholders of £456,000 were paid.

Employment averaged 243 people in 2016-17, a decrease of 1% compared to the previous year.

It has announced a £5m upgrade of the Crowne Plaza at Shaw’s Bridge with the refurbishment of 120 rooms, including the addition of new bathrooms.

It also plans to add another 36 rooms, including bridal suites and a presidential suite.

It’s already carried out a revamp of the hotel’s public areas.

The venue was renamed the Crowne Plaza in 2016 after Andras House acquired the franchise from owner InterContinental Hotels Group.

Belfast Telegraph

Weekly Business Digest Newsletter

This week's business news headlines, directly to your inbox every Tuesday.

Popular