The charges to be levelled on households by Irish Water will allow the new utility's debts be excluded from the national debt, Minister for the Environment Phil Hogan, has said.
In a letter to this newspaper Mr Hogan said certain Eurostat rules must be met to ensure the new utility’s finances did not form part of the Government’s finances.
“The decisions taken by the Government last week have been framed by our understanding of the Eurostat requirements and I am satisfied these requirements will be met,” he said. “The budgetary framework is based on Irish Water being classified as a market corporation.”
Mr Hogan's letter came in the wake of a report in this newspaper last Friday in which experts said average annual charges of €240 per household would not be sufficient to ensure that more than half of the utility's income came from its customers. They said it would be necessary for the debts associated with Irish Water to move "off the books" of the State, a position that would result in interest savings.
Taxpayer subvention
A spokesman for Mr Hogan said the position relating to the Eurostat rules had been set out by Taoiseach Enda Kenny in the Dáil on April 16th.
On that day, Mr Kenny said the Government considered it important that Irish Water’s finances be classified as separate from the Government’s.
The Government had noted the advice from Mr Hogan that the level of taxpayer subvention for Irish Water, consistent with it being classified as a commercial State company, could not exceed €537 million in 2015 and 2016. "That equates to an annual average metered charge of €240."
'Serious implications'
Mr Kenny said there had been intensive engagement with the Central Statistics Office over the Eurostat rules, and the CSO had advised on the maximum level of subvention.
“If we were to fail the market corporation test, the consequence would be a €700 million capital cost being incurred by Irish Water which would impact on the Government deficit and would have serious implications in that regard,” he said.
The Government could not put any more funding into Irish Water without putting it back on the Government books. If there was no subvention, the average domestic charge would be €580.
A spokesman for Mr Hogan said the free water allowance was being funded by way of a subvention by Government to Irish Water, and would not, therefore, have the effect of increasing the price of charged-for water, as suggested by the experts.
He said an arrangement whereby the Government paid for water on behalf of “certain targeted customers” would count as customer revenue for Irish Water. Such State support did not have to come via the social protection system in order for it not to feature as State income for Eurostat purposes.
