21 December 2004

CHARGES ESSENTIAL TO SUSTAIN INCREASED INVESTMENT

Welcoming the increases outlined in funding for Water and Sewerage Services in yesterday’s budget, DRD Minister, John Spellar, MP said it underlined the fact that a sustainable water and sewerage service in Northern Ireland requires radical reform – both in how the service is financed and delivered.

He also challenged those opposed to water charges, to outline how they would finance the Service in the future.

"The budget statement issued by my Ministerial colleague, Ian Pearson, is good news for water and sewerage. It illustrates the Government’s commitment to this sector, with £735 million of capital to be invested between 2005-06 and 2007-08. In addition, a Public Private Partnership programme, currently estimated at £300 million, is being taken forward."

On the ground this means Water Service will be taking forward over 300 projects, ranging from new water and wastewater treatment works, to small scale watermain and sewer extensions, and will include upgrading over 100 wastewater treatment works, 15 large water treatment works, over 700 kilometres of watermains and 600 kilometres of sewers. This will result in:

• improvements in the quality of our drinking water;
• cleaner rivers and beaches;
• less leakage; and
• more investment in flood prevention.

This will address a substantial proportion of the backlog of investment in the water and sewerage infrastructure. The Minister explained:

"This investment comes at a price. Northern Ireland is the only part of the UK that continues to use public expenditure to pay for its water industry. These high levels of investment and the revenue costs of Water Service mean that we are spending less than we should in other priority areas such as health, education and transportation.

"As Ian Pearson said yesterday, our long-term plans for investment are based partly on the introduction of water charges from 2006-07 onwards."

The Minister added: "The figures speak for themselves. The average rates bill here is just over £500, whereas elsewhere in the UK, average household bills for property taxes and water charges are around £1200.

"Faced with this scenario, the previous Executive recognised there was no realistic prospect of increased funding from the Exchequer while household contributions here are so comparatively low, even taking account of regional variations in incomes and the cost of living."

As Treasury intervention is not a realistic option, the Minister said:

"We face two choices. We can continue to use resources available from the rates and general taxation for water and sewerage, knowing that this is depriving other services of much needed resources. Or we can increase household contributions to a level closer to what people in England, Scotland and Wales are paying.

"This is not an easy choice and we fully recognise that charges will mean a new burden for households here. But that is why we are proposing to phase them in over three years and to provide protection to those on low incomes."

Mr Spellar added: "What is also often forgotten is that as the new charges are introduced, the resources no longer needed for Water Service will be made available for other services, ultimately some £300 million, and in the present difficult budgetary climate that can only be a good thing."

The alternative is to continue with the status quo, where we continue to finance water and sewerage from public expenditure – but the cost of this would be considerable for public services and the people who rely on them.

He said: "Those wishing to finance water and sewerage services from public expenditure should recognise that would mean:

• £50 million of planned spending allocations for other public services in 2006-07 would be lost as set out in the Budget document;
• from 2008-09, the potential of around £300 million per year for other public services would be lost;
• the RRI borrowing concession, which is currently providing £200 million per year for capital investment for all public services, would be lost; and
  
• a further £50 million or more would need to be found from other public services for 2007-08 onwards, to cover the cost of water and sewerage depreciation and capital charges, a figure which would rise rapidly over the next decade and beyond."
  

NOTES TO EDITORS:

The Government considers that Northern Ireland gets a fair share of general taxation. In 2000-01 for example, total public expenditure in Northern Ireland was just over £13 billion, while total tax receipts were around £7.5 billion. This means the total subvention for Northern Ireland was around £5.5 billion or over £3,200 for every person.

Major investment in water treatment work will take place at Fofanny Co. Down, Curran Hill Co. Armagh, Dunore Point and Castor Bay. Major wastewater treatment will take place at Culmore Co. Londonderry, Omagh, Larne and North Down.

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