Speech by An Taoiseach Enda Kenny on Water Sector Reform

Some weeks ago, I promised that the Government would listen to people’s genuine concerns about the impact and affordability of water charges.

We also promised to bring clarity, certainty and predictability to this issue and that’s what the Government has done in its decisions today.

There is a recognition from all reasonable voices that the antiquated 19 ^th  century set up we had for water services would not serve the needs of our country or our children. 

For too long difficult political choices were ignored and put off by previous Governments. 

The problems flowing from an underinvested and unreformed water network can no longer be ignored. 

We cannot look away from the raw sewage that continues to flow into our streams, rivers and harbours near 42 towns. 

We cannot allow 22,000 people be stuck on boil water notices indefinitely.

We cannot stand over a situation where water supplies for 945,000 people require urgent remedial action.

We cannot afford losing nearly half of all treated water into the ground. 

And we cannot threaten job creation and recovery by keeping the drinking water supply for the Greater Dublin Area on a knife edge. 

None of this is acceptable. 

The old system – based around 34 different local authorities each trying to provide water services out of annual grants from central Government – has failed us.

This is not because of any lack of dedication by local authority staff.

It is because water planning stopped at county boundaries. There were no economies of scale. The ability of local authorities to borrow for investment was severely restricted. And investment decisions have been slow, bureaucratic and uncoordinated. 

Why would we continue with this? Would we try to plan and run our electricity and railway networks on a county basis? It seems that is what the opposition propose.

Our population is growing, our economy is the fastest growing economy in the euro zone, and our climate is changing. 

We have to change Ireland’s public water supply system to meet these new and growing demands.

There is no perfect time to take decisions that have a financial impact on households, least of all as we are emerging from one of the worst recessions this country has endured.

The last recession was caused by economic mismanagement… 

By choosing the politically expedient over the difficult reform. 

As Taoiseach and as a Government we have to take decisions in the long term interest of our country. 

By 2030, the world is expected to have 40% more water demand than supply. 

According to the World Economic Forum, water crises are already the third global risk that countries are most concerned about.

We have a responsibility to ensure that Ireland is not a victim of water deficit, by investing sustainably in our water system after decades of under-investment so that it is resilient enough to face the new demands.

Charges

In today’s announcement the Government is bringing clarity, certainty and predictability to the pricing regime that will apply to domestic water services. 

Ceann Comhairle, we have listened carefully to the concerns of families and of the vulnerable. I commend those who have done this in a peaceful manner. Their voices have been heard.

Today we are outlining a comprehensive package that will provide long term certainty for everyone.

Single adult households will have a capped charge of €160 but will amount to an effective charge of €60 after registering with Irish Water to receive an annual water conversation grant of €100 from the Government. That’s a cap of €1.25 per week. 

All other households will have a capped charge of €260 but will also amount to an effective charge of €160 once the annual water conversation grant is also taken into consideration. That’s a cap of €3 per week.

It is important to note that this is a capped charge, not a flat charge. Water conservation is still central to this package of reforms. There are real incentives for households to manage their water use. 

All households with a meter can still use their water carefully in order to reduce their bills even further. If metered households can reduce their water consumption by between ten and fifteen per cent, then approximately half of Irish households will be able to ‘beat the cap’ and have bills lower than the amounts outlined.

Even households without a meter today still have an incentive. If their metered use in the future shows less use than the capped charge they will be entitled to a rebate. 

Meters are also an essential tool in finding leaks on the customer side. This represents 10% of the overall leaks nationwide. The first free fix scheme that will be rolled out by Irish Water will address these wasteful leaks.

The capped charges will be in place until 2019.

The volumetric charge of €3.70 per 10,000 litres remains low by European standards. Some parts of Britain pay as high as €6.63.

People do not know the price of gas next year. They do not know the price of electricity in two years. But what they do know from today is the maximum bill for water for the next four years.

People will rightfully ask what happens from 2019 onwards.

This Government is determined that water charges will always remain affordable.

That is why the Government will legislate so that domestic charges from 2019 onwards can continue to be subject to caps and allowances set by the Minister for the Environment.

There will be no change in charges until the metering programme is near completion and the public are confident that their contributions are being used widely by Irish Water to address the many defects in our network. 

Average charges will also continue to be kept low through reductions in operating costs by Irish Water itself.

Irish Water will now come forward in early 2015 with a plan to significantly reduce headcount and operating costs up to the end of 2018 by steadily eliminating the inefficiencies inherent in the current fragmented water system. 

I understand the daily challenges being faced by low- and middle-income households across the country in making ends meet. This Government is determined that the economic recovery is felt across the country and in every household.

That is why I can confirm today that this is the last new national charge to be introduced by this Government. 

I can also confirm that the combined budgetary measures – tax cuts, improvements in child benefit and the water conservation grant – will more than offset water charges for every household in the country with somebody in full-time work.

As a result of the tax cuts announced by Michael Noonan, a single worker on the average wage of €35,000 will get tax cuts of €400 in 2015 – almost seven times the net water bill of €60. 

A married couple with two kids earning €55,000 and €50,000 respectively will be over €1,040 better off next year after paying the maximum net water charge of €160. 

A single person on the minimum wage will get a tax cut of €173, almost three times the maximum net water charge for a single adult household.

This is only the first instalment of a plan to progressively reduce the tax rate on low and average earners. 

I confirmed during my Budget Speech that the intention of Government is for the tax rate on middle income families to be lowered further in Budget 2016 – to at most 50%.

This is all possible because Ireland is in recovery. 

We have moved from a situation in 2011 where the very future of the economy was in doubt to one where we are the fastest growing economy in Europe. 

We have created 70,000 new jobs since we launched our Action Plan for Jobs and are on course to exceed our 100,000 new job target next year. 

11% unemployment is unacceptable and that it why we must push on with our reforms to help create more jobs and investment. 

The Government is also hitting its deficit reduction targets, a prerequisite for jobs and investment. 

The alternative now being offered by the opposition parties is very clear: undo the progress we have made; increase taxes on income and employment; retain a broken and wasteful water system. Less work. Less investment. More waste.

They thrive on fear and misinformation. 

They offer only protest, slogans and dead ends. They have no solutions to the complex problems facing our society and economy today. 

And when the country sees the benefits of these reforms and the debate moves on to the next challenge, they will abandon those vulnerable households who they have encouraged to break the law. 

They have no alternative to the vision of Irish Water. 

Irish Water

In contrast, this Government is about finding solutions. We are driven by the need to reshape Ireland to safeguard the future for our children.

In that context we stand fully over the decision to create a single water utility. 

A single centre of expertise to manage the national water network is already starting to deliver benefits.

The utility has already adopted a new approach towards asset management and capital projects planning. Evidence of this is the targeted €170 million saving through the proposed Ringsend waste water treatment plant upgrade as an alternative to plant extension. That is the cost of Irish Water’s establishment saved in one strategic decision.

This has happened because the utility is taking a national approach to all water assets. This is best practice in asset management and points to the company’s new, modern approach. This would have been very hard to achieve under the disparate, local authority-managed public water system.

The centralisation of procurement is also delivering new efficiencies, never achieved under the old system of 34 different water services authorities. €12 million has been saved on goods and services procurement in the first year alone. 

There has already been a new focus on improving water quality that people in certain parts of the country such as Roscommon would like to have seen years ago. By the end of the year, as a result of Irish Water, boil water notices will be removed for the first time in twelve years in parts of Roscommon. 

In addition almost 21,500 people are using drinking water supplies that are no longer deemed at risk through the Environmental Protection Agency’s Remedial Action List. 

Irish Water have now outlined a €1.8 billion capital investment programme to improve water services nationwide. In the interests of transparency and accountability a new public forum drawing from households and businesses will be established to engage with Irish Water on matters such as priorities for investment and service standards. 

In undertaking a reform of this scale and ambition, this Government has made mistakes along the way and I acknowledge that.

But establishing Irish Water has not been one of them.

I recognise that as a new utility, in charge of a vital natural resource, Irish Water has a great challenge to build public trust in its operations. 

By the end of the first phase of its operations by 2018 I want to see Irish Water accepted as the trusted guardians of our vital water supplies for the benefit for every citizen in this State.

This can be achieved by delivering for the Irish people… By delivering better supplies into people’s homes… by taking the raw sewage out of our precious rivers and lakes… and by providing a consistent and high quality service to industries reliant on water. 

These will be the criteria on which the success of Irish Water will be judged. 

The coming few years will see the transformation of our water services and, in time, of Irish Water itself.  Today’s announcement is a major milestone on delivering on our reform programme. 

After decades of inaction this Government was elected on a strong platform of radically changing how we manage our economy, our public institutions and our natural resources. 

This is what that reform looks like. From local government, welfare and work activation, the financial sector, national finances, bankruptcy laws, supports for small business, further education, the junior cert, the health service, Freedom of Information, Haddington Road, the political system, child protection – this Government has introduced more radical reform in little over 3 years than the last 3 Governments. 

Change can be difficult for many, especially faced with uncertainty. 

I hope that the Government announcements today on the scale and scope of the water charges will address many of the fears and concerns people had over these reforms.  

We can now move on and continue the work to secure the recovery. To make Ireland a better place for our families, our children and for our way of life.