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Introduce water charges or raise rates, Northern Ireland ministers are urged

By Noel McAdam

Stormont ministers are being urged to reconsider the introduction of water charges or raising more money by increased rates.

Either measure could help offset the cash cuts to the block grant if the Executive is granted the power to reduce corporation tax.

But the moves would be highly unpopular and remain unlikely in the run-up to the next Assembly election in May 2016 - though could come under the spotlight in the longer term.

A paper commissioned for the Executive and produced by civil servants asks if it remains "prudent" to continue to subsidise NI Water by around £300m a year.

And it questions whether ministers are correct in concluding that higher regional rates would damage consumer confidence.

It states: "Given this predicted sustained period of budget constraint in Northern Ireland, due consideration should be given to financing measures outside the usual Westminster allocations", with a range of ideas also including borrowing and the use of European Union funding.

The Executive has set its face against any introduction of charges for water and already announced that household rates bills will be pegged at the level of inflation.

Its draft budget for 2015/16 has reaffirmed that position. Agreeing the budget forms a key component of the multi-party talks. Their success could trigger legislation granting the right to reduce corporation tax. The briefing paper argues, however: "In justifying this decision, the Executive appears to suggest a link between higher household rate bills and a resulting fall in consumer confidence; which would negatively affect the Northern Ireland economic recovery.

"Given the regional rate only constitutes a part of the Northern Ireland total household rates bill, a question arises about the basis for the Executive's assessment of consumer confidence.

"By not introducing water charges to Northern Ireland, the Executive is effectively left with no choice but to support NI Water financially, by approximately £300m a year.

"This subsidy is projected to increase in the coming years... is it prudent that the Executive continues to subsidise NI Water to the extent it does?"

The paper points out Northern Ireland is unique in the UK in not paying a direct charge for water and sewage services, but concedes households "do make an indirect contribution through the domestic regional rate".

It points out that ministers are already "confronted with a range of pressures that necessitate £872m worth of reductions" in their budget.

Our stance is unique within UK

Water: Executive ministers have steadfastly set their faces against the introduction of charges for water and sewerage services - making Northern Ireland unique within the United Kingdom. Only the Alliance Party has come out in favour of water charges being considered. The consequence of the decision against their introduction is a £300m annual subsidy for NI Water, which is likely to increase in the future.

Rates: Household rates bills are made up of two parts - the regional rate, set by the Executive, and district rate, with the province's 11 new super councils expected to set the rates for next year even before they replace the current 26. Revenue from the regional rate is unhypothecated, which means that the Executive can use it to fund any project, as it is not restricted to any specific spending programme, although such use has to comply with applicable Treasury rules

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