Response to request from the Joint Committee on the Future Funding of Domestic Water Services
Steven McGiffen
Steven McGiffen is a former member of the Secretariat of the European Parliament United
European Left-Nordic Green Left (GUE-NGL) with special responsibility for environment and public
health issues and the author of a number of books on European politics, including Poisoned Spring:
The EU and Water Privatisation 2009 (with Kartika Liotard).
I have been asked by the Joint Committee on the Future Funding of Domestic Water Services in
Ireland to present my observations on water pricing in other countries. As Ireland is now (once again)
the only EU member state which does not charge domestic consumers directly for water
consumptioni, it is in some ways difficult to make a comparison. Where charges are imposed, they
vary from about €1 per cubic metre to around six times that amount. Ireland’s recently withdrawn
charges were amongst the lowest, ahead of only Greece, Bulgaria and Romania.ii
Domestic water bills vary greatly among EU member states. According to the European
Environmental Agency, “bills not establishing a direct link with the actual amount of water consumed
or discarded are higher than those for which water pricing reflects both fixed and variable
(volumetric) components. This applies to all countries, with the exception of Germany.” The EEA also
notes that where – as in much of Britain – water charges are imposed according to the size of the
property, bills are higher and the system “reduces any incentives for increased household water-use
efficiency.” iii The Irish public has, however, made it clear that it is not prepared to accept direct
charges for water, while real household consumption is in any case comparable to that of other
countries. If water must be saved, the main task should surely be to address the problem of waste
through leakage, though domestic consumers should also be encouraged and educated – and, in an
extremity, coerced – into where possible reducing their own use. In addition, it should be noted that
wasteful practices by major non-domestic users have the effect of discrediting domestic water
conservation measures which may be seen as inconveniencing ordinary people. In this situation it is
the state’s responsibility to avoid waste itself and ensure that other major non-domestic users do so.
Given the fact that the Irish public is clearly unhappy about the way in which water charging was
introduced and conducted, the first priority may be to reassure them that it will not be reintroduced,
and that some alternative method will be adopted to cover the costs of maintaining the water supply
system and financing what appear from the Expert Committee Report to be urgently needed
improvements. This will clearly take some time, involving extending the process of public
consultation, or giving decision-makers the opportunity to consider submissions before deciding on a
system which will achieve what the Expert Committee’s comprehensive and impressive report
correctly recognises must be the goals of a water delivery charging system: covering costs; making
these costs and the way in which they are covered transparent; conservation of water resources; and
protecting low-income households from financial burdens which they are not in a position to carry.
Empirical evidence points conclusively to the fact that the sine qua non of achieving these goals is
public ownership of the domestic water supply. The Expert Commission notes (point 3.2.1) that the
possible privatisation of the system was of more concern to the public than were the charges
themselves. Moreover, since the beginning of the century there has been what researchers David
Hall and Emanuele Lobina have identified as “a trend away from multi-utility multinationals and/or
stock exchange quoted companies towards increased ownership by the state or by private equity.”
Response to request from the Joint Committee on the Future Funding of Domestic Water Services
Steven McGiffen
Private equity dominates the privatised systems of England and Wales, but in the rest of Europe
public ownership prevails, with remunicipalisation of previously privatised systems being a major
reason for this.iv
The Netherlands
Where water supply has been privatised, widespread re-municipalisation is taking place in response
to the problems associated with rent-seeking corporate owners, a process which has been described
“as a collective reaction against the unsustainability of water privatisation and PPPs”v Privatisation
has failed to deliver, a fact recognised by the Dutch government and Parliament in 2004 when they
passed the ‘Drinkwaterwet’ (Drinking Water Law) in 2004.vi This bans private companies from the
supply of domestic water. Although privatisation does not seem to have been put on to Ireland’s
agenda, regaining the trust of the country’s people is clearly a priority. Passing a law – or better still,
a constitutional amendment - to guarantee that water will remain in public ownership would
represent a major step towards this goal. The law in the Netherlands does not – and Ireland’s need
not – ban these publicly-owned companies from contracting certain services out, provided the core
activity remains in public hands and the client’s direct relationship is at all times with the water
supplier itself. I would also recommend that, where services must as a result of EU law, be put to
tender, that public and/or cooperatively-owned entities be created to compete in this process.
I have worked closely for twenty years with the Socialist Party of the Netherlands (SP) and continue
to do so as translator and occasional consultant since my retirement from the European Parliament.
In the Parliament I represented the SP on the Secretariat of the United European Left-Nordic Green
Left (GUE-NGL) political group (to which Sinn Fein and the Independent Luke Ming Flanagan are
affiliated, as was the Irish Socialist Party when represented) and acted as an advisor to both the party
and the group on environmental issues. The SP is a relatively new party, has never been in
government and is generally highly critical of the neoliberal politics of those who have, so its positive
assessment of Netherlands’ domestic water delivery system is recognition and confirmation that this
law underwrites the provision of a supply of affordable good quality domestic water to the entire
country. The system in the Netherlands also underwrites one of the lowest rates of daily water use in
the developed world, at 128 litres per person per day, in part because water leakage in the
distribution network is one of the lowest in the world at only 6%. Almost all water users (96%) are
metered and a portion of their bill - typically about one half - is based on actual consumption. vii
Anyone who does not have a metre is charged according to a calculation based on the number of
inhabitants and type of house. Tariffs are, however, the third highest in Europe.viii In Ireland, which is
much less prosperous than the Netherlands, the sums needed to maintain and upgrade the domestic
water delivery system can only be found, if the system is to remain in public hands, from general
taxation. This is also the most equitable way of raising money. Other ways must be found to
discourage wasteful use of water. It should also be noted that water usage is already at a reasonable
level . The requirements of EU law, as well as the direct issue of the state’s responsibility to protect
public health, make these matters urgent.
France
Response to request from the Joint Committee on the Future Funding of Domestic Water Services
Steven McGiffen
Public ownership of the domestic water supply is the norm in Europe, but systems do vary quite
widely. In France the water supply is traditionally carried out by private corporations contracted to
the communes (local authorities). However, there has recently been a major wage of
(re)municipalisation, which, as PSIRU researchers have noted is a reflection of “the greater efficiency
of public sector provision, and the greater degree of control over the effective achievement of public
policy objectives.”ix
Remunicipalisation has gained huge support from the public and their elected representatives - and
an enormous amount of success as a result – due to a number of factors. Predictably enough the
first of these is the variation in price: in 2009 showed that private water prices were on average 31%
higher than in public water services. Secondly, the expiry of a large number of water supply contracts
from 2010 onwards has “facilitated re-municipalisation, because the public authority can choose to
change to a direct public service without paying compensation, and in any case requires a decision
whether to retender or re-municipalise, so creating widespread debates.” Thirdly, a law passed in
2010 with all-party support “enables two or more communes or municipalities to create a local
public company…. 100% owned by public authorities, to carry out local public services, without the
need to invite tenders from private companies.” x
One problem which has long been associated with privatised water companies in France is
corruption, fuelled by “the sheer quantity of public money swilling around the system”, largely from
extraction fees paid to one of six river basin agencies.xi As is almost always the case when
privatisation is carried out, private ownership results in no reduction in subsidies, partly because
“private companies…. pay only a third of the costs of the infrastructure projects from which they
benefit.”xii
Paying for and conserving water in Ireland
Irish Water estimates that €5.5 billion will be needed to 2021 to make the necessary investment. This
figure may be open to question, but even if it is accurate, the necessary funds can be found through
a mix of revenue sources. According to the Public Services International Research Unit, in the long
term, not only enormous amounts of money, but people’s lives, will be saved.
This leaves two questions. The first is what is likely to constitute the ‘mix of sources’ to which I refer
above? Charging has been both massively unpopular and a failure in terms of raising finance for
infrastructure. And according to PSIRU’s research, private finance also makes no sense in this sector.
As PSIRU points out, money is always cheaper for the state than it is for private investors. This is
because “the state can finance construction directly from tax revenues” but “if it chooses to
borrow…. It can do so more cheaply than the private sector, because of the superior security of tax
revenues.” In a study conducted in Italy, it was discovered that as in this sector capital costs
represent such a high proportion of total costs, “the lower cost of public finance is decisive. The
difference in the capital costs between public and private is as large as the total operational cost”.xiii
The private sector also lacks the capacity for the kind of long term investment required to construct,
maintain and upgrade fully comprehensive water delivery systems.xiv
Response to request from the Joint Committee on the Future Funding of Domestic Water Services
Steven McGiffen
The second question is how can people be persuaded to conserve water if charging is ruled out? If
the system of funding through general taxation which has prevailed in Ireland, and to which the
reaction to the introduction of water charges shows that the Irish people are extremely attached is to
be maintained, then we will be left with the problem of conservation. According to the Expert
Commission, many submissions have advocated a system of “paying for excessive use”. This would
presumably involve almost all Irish Water clients paying nothing for their water beyond what they
contribute in their taxes, but punitive levies being imposed for using more than is considered
reasonable. I would not oppose this, but it must be preceded by non-punitive measures involving
education on the subject of limiting one’s water use. This should be done in any case via
broadcasting media, newspapers, the internet etc.
Individual households exceeding their notional quota could be targeted for additional education as
well as the supply of water-saving devices, as recommended in the Expert Commission’s point 5.7.1.
this approach is favoured by the United States Environmental Protection Agency (EPA) which notes
that “Water systems can promote conservation through a retrofit program. Retrofitting involves
making an improvement to an existing fixture or appliance (versus replacement) in order to
increase water-use efficiency. Retrofit programs usually target plumbing fixtures.” They also note
the availability of “low-flow faucet aerators, low-flow showerheads, leak detection tablets, and
replacement flapper valves.”xv Such kit can be made available free of charge to low-income
households, or at cost to others. The details can be left to people with specific expertise in this area:
the point is, the system should attempt to be helpful rather than moving straight to a punitive
approach. Such an approach should be taken only in cases of clear and extreme wastefulness. If a law
or constitutional amendment forbids charging for water, need it also forbid fines for overuse? This is
a matter for Irish lawmakers to decide, of course. However, it does not seem to this researcher
impossible to design a system which imposes no normal charges but allows for fines to be imposed in
instances of persistent excessive use. This is the only qualification I would make to the Expert
Commission’s statements at 5.2.2 and 5.2.3, with which I fundamentally agree.
It is hard to see how such a system could work without metering, which may not be popular. The
principle of democracy is also important here, as the Expert Commission recognises at 5.2.5, where it
recommends that “the level of allowance be set as a result of an open and transparent process.” The
same principle will be needed if people are to accept metering.
Direct water charging may work well for other countries, but that does not prove that it would work
well in Ireland. A major criticism of the European Union is that it exhibits a one-size-fits-all approach
which fails to take into account national traditions. This criticism was noted by the Expert
Commission (point 3.7.2) which reported the widespread view that “the decision to introduce water
charges was imposed as part of the EU-IMF programme of financial support to Ireland and not as a
natural part of the domestic socio-political process.”
In conclusion, I would argue that the most efficient and equitable systems in Europe and globally are
those which are at pains to protect the least well-off. Such systems do not generally entirely abjure a
punitive approach to extreme cases of wastefulness amongst domestic consumers, but lay the
emphasis more on education and the promulgation of effective solutions to instances of over-use ,
including those involving technology.
Response to request from the Joint Committee on the Future Funding of Domestic Water Services
Steven McGiffen
Finally, it must be noted that the importance of this issue goes beyond the inherently vital nature of
the substance in question, and beyond even the broad matter of public health. Opposition to both
charges and to privatisation needs to be respected if people are not to conclude that Ireland’s
democracy is being undermined by outside forces, principally the European Commission, which is
widely believed to be committed to finding ‘market’ solutions to anything and everything. A series of
overturned or ignored referendum results in Ireland and elsewhere have undermined the EU’s image
as a family of democratic nations, and for obvious historical reasons Irish citizens do not welcome
being dictated to by foreign entities. As things stand Ireland has avoided the rise of a far right party
such as UKIP, the DUTCH PVV or France’s Front National, and it is important to maintain this state of
affairs. So the question of Ireland’s water, how to pay for it and how to finance the necessary
modernisation of the system are also questions involving democratic rights and how these are
understood, defined and exercised in your country. Ireland’s people, in common with those in many
other European Union member states, have a thirst not only for wholesome and affordable drinking
water, but for the feeling that they control their own country, their own towns, villages and
neighbourhoods; that they are, in other words, citizens of a democratic society.
NB: The most comprehensive, up-to-date research on this issue is provided by the Public Services
International research Unit at http://www.psiru.org/. I would respectfully suggest that, should it
not already have done so, the Committee follow up its consultation of myself (nowadays an
independent researcher) by approaching this well-resourced group.
i
“Fact Check: Does every other country in Europe have water charges?” The Journal, Oct.6, 2016
http://www.thejournal.ie/what-countries-in-europe-have-water-charges-facts-3002075-Oct2016/. This article
does point out that there is one small exception, which is that part of Ireland which remains in the United
Kingdom.
ii
iii
iv
European Environmental Agency “Assessment of cost recovery through water pricing” (2013)
David Hall et al “Water in Europe” Public Services Research Unit, (2008)
Response to request from the Joint Committee on the Future Funding of Domestic Water Services
Steven McGiffen
v
Satoko Kishimoto et al “Our public water future: The global experience with remunicipalisation” (Public
Services International Research Unit, April 2015) p.8
vi
Tweede Kamer der Staten Generaal ‘Nieuwe bepalingen met betrekking tot de productie en distributie van
drinkwater en de organisatie van de openbare drinkwatervoorziening (Drinkwaterwet)’ (2006)
https://zoek.officielebekendmakingen.nl/kst-30895-3.html
vii
Dutch Drinking Water Statistics 2012
http://www.vewin.nl/SiteCollectionDocuments/Publicaties/English%20_publications/Vewin_Dutch_Drinking_w
ater_statistics_2012.pdf
viii
“Survey Finds World Water Rates Rising”, Water World, 19/1/2003
http://www.waterworld.com/articles/print/volume-19/issue-1/editorial-focus/survey-finds-world-water-ratesrising.html
ix
David Hall et al “Re-municipalisation in the early twenty-first century: water in France and energy in
Germany” International Review of Applied Economics, 27/2 (2013) p.194
x
David Hall et al “Re-municipalisation in the early twenty-first century: water in France and energy in Germany”
International Review of Applied Economics, 27/2 (2013) p.200
xi
For a examples, see Kartika Liotard and Steven P. McGiffen Poisoned Spring: The EU & Water Privatisation
(Pluto Press, 2009) pp.147-150
xii
Alexander Orwin The privatisation of water and waste water utilities : An international survey (Environment
Probe, 1999)
xiii
David Hall et al The past, present and future of finance for investment of water systems. (Public Services
Research Unit, April 2015) p.4, http://www.psiru.org/reports/past-present-and-future-finance-investmentwater-systems.html
xiv
Antonio Massarutto et al “Private management and public finance in the Italian water industry: A marriage
of convenience?” Water Resources Research 2008, Vol.44
http://onlinelibrary.wiley.com/doi/10.1029/2007WR006443/full
xv
USEPA Water Conservation Plan Guidelines, Appendix A, p150,
https://www3.epa.gov/watersense/docs/app_a508.pdf