Monday, November 17, 2014

How much do we spend on water?

Here is data from Eurostat on government expenditure in Ireland on water (divided between “water supply” and “waste water management”)

Expenditure on Water 2012

This includes expenditure for commercial as well as domestic supply of water.  Around €300 million is collected annually in commercial water rates.  Two things are worth noting:

  • Two-thirds of the expenditure relates to the management of waste water and one-third to water supply.
  • One-sixth of the total relates to the intermediate consumption involved in actually supplying water (€250 million).

Here is a table with the same data for the decade from 2003 to 2012. Click to enlarge.

Expenditure on Water 2003-2012

Over the decade the government spent €18 billion on water services.  The intermediate consumption of actually supplying water is 11 per cent of the total (€1,981 million out of €18,057 million).

The element showing the greatest variation over the years is gross capital formation (investment in infrastructure).  This was around €600 million in 2003, rose to €1,100 million in 2007 and was reduced to less than €400 million in 2012.

In financial terms, the most significant austerity measure in relation to water is not the introduction of domestic water charges; it has been the slashing of capital expenditure on water infrastructure.  This has short-term benefits for the deficit but the money will have to be spent at some stage.

Here is a comparison of public capital expenditure on water (funded directly by the government) and on public capital expenditure on electricity (funded indirectly by the ESB).  No value for money judgements are implied.Water versus Electricity Capex

The table does not include private capital expenditure and there have extensive subsidies and incentives for private capital expenditure in electricity (wind farms etc.) in recent years.   It also excludes private capital expenditure on water by the many not connected to the public water system.

In 2008, public capital expenditure in the two areas was almost identical.  By 2012, public capital expenditure on water had been cut by 65 per cent and was almost 50 per cent below its 10-year average of €716 million.  Capital expenditure by the ESB was also reduced but was  20 per cent below its 10-year average of €966 million. 

The cuts to capital expenditure on directly funded water services were far greater than those to capital expenditure on indirectly funded electricity services.  This was done mainly to achieve deficit reduction targets.

The water charges debate has focussed on the cost of the water that comes out of the taps.  For the past ten years that has been about 10 per cent of the cost of public water services.  We need to make sure we can fund the other 90 per cent.

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