What is truth?

 

Posted: 05 Nov 2014 08:28 AM PST

 

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I admit I can’t let this issue go but such is the misrepresentation, partial information and deliberate obfuscation being put out in the debate that it goes beyond a narrow calculation.  It actually reveals a Government determined to hide the facts in pursuit of a policy which caused over 150,000 to demonstrate last weekend. Yes, I’m talking about water charges – but specifically about the estimated impact on the deficit if water charges were removed.  And now Dr. Tom McDonnell over at the Nevin Economic Research Institute has done his own sums – and they mirror what I had previously calculated here. The Government is claiming that removing the water charges would ‘cost’ €800 million (thiswas run out again on Morning Ireland today).  Is this correct?  No.  Let’s look at how the Government is obscuring the real numbers and see if we can find the right ones.  If this gets a little ‘number-dense’ please stay with it for it is about more than just abstract calculations; it is about how the Government is treating this issue and the public at large. All numbers areapproximate and rounded.  I have produced a summary table below.

  • First, the total cost of water service provision is €1.3 billion (€700 million in current spending and €600 million in investment).
  • Second, the Government is committing €500 million from the Local Government Fund to Irish Water.  This is ‘on the books’; that is, this is counted as government expenditure.
  • Third, this leaves a saving to the Government of €800 million.

So far, pretty clear. TheGvvernment’s argument seems to stack up.  But, no, this is not the case.  Because the Government is losing €250 million in revenue.  This is the amount collected through commercial water charges on businesses  This used to Government coffers.  Now it belongs to Irish Water. So the Government gains €800 million savings on the expenditure side but loses €250 million on the revenue side.  This leaves a saving ofapproximately €550 million. This is pretty much the same number that Dr. McDonnell arrives at:  €527 million. Ok, so we have sorted that out.   Theactual cost  of removing water charges would be €550 million – yes?  No, that’s not it either.  Because the Government is spending money as part of the move to water charging – spending that wouldn’t exist if there weren’t the charges.  Dr. McDonnell states that he doesn’t factor these in.  So let’s do that.  There are three expenditures:

  • First, Social Protection is increasing subsidies to the Household Benefit Package and recipients of the National Fuel Allowance scheme ‘to offset the cost of their water bills’.  This will cost €66 million.

Finally, the cost of providing free water allowanced for children is ‘on the books’; that is, itis counted as government expenditure.

‘Social transfers in kind include such items as free travel on public transport, fuel allowances and the child-based free allowance related to water charges.’

‘How much does this cost?  The Government doesn’t say.  But we can estimate.  There were approximately 1,170,000 recipients of Child Benefit.  Each one of these childrenshould be receiving a free water allowance of 21,000 litres per year.  On the basis that this will cost €102 per child, this brings the total cost to €119 million.  But this is just an estimate so let’s be conservative and round it down to €100 million. When weadd up these costs – Social Protection subsidies, tax relief and free water allowances for children – it comes to €200 million.  This will ‘cost’ the Government.

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