Watchdog urges new funding model for NI Water

A key Northern Ireland (NI) spending watchdog has warned Stormont that publicly owned NI Water urgently needs a new funding model or risks falling further behind its peers in service quality and environmental standards.

Chronic underinvestment in wastewater infrastructure is also constraining economic development, according to the NI Fiscal Council, particularly in areas requiring commercial and residential growth.

The water company, currently a non-departmental public body, does not levy domestic water charges. The prospect of household water charges remains a highly contentious political issue in Northern Ireland.

Ofwat is not happy with the performance of the water companies in England and Wales and has sanctioned big increases in water charges over the next five years. But this injection of funding is something NI Water cannot match under its current subsidy-based model, placing it at a growing disadvantage.

The water company could change its status by being privatised or mutualised which would allow it more financial flexibility. However, for as long as it remains in the public sector, under Treasury rules, NI Water’s spending is constrained by the budget cover it receives in the Northern Ireland Executive’s Budget rather than by the availability of cash. In recent years, this budget cover has fallen short of the water regulator’s recommendations.

As long as domestic water charging remains politically impossible, there are few options for increased funding. Stormont is exploring a system of developer contributions but all agree this would be a help rather than a complete panacea.

Sir Robert Chote, chair of the Council, said: “Water and sewerage services are essential to public health, environmental protection and economic development. The current funding model is not fit

for purpose. Charging for water or increasing taxes would put a further squeeze on the household finances, but failing to do so has its own costs.”