Northern Ireland’s government-owned water company will struggle to match the increased investment that is being sought for improved services in other parts of the UK, MPs have heard.
The Northern Ireland Affairs Committee, which is examining the funding of public services in the region, also heard that pressure is building from the Treasury for the Stormont Executive to do more in terms of raising its own revenue.
Asked about revenue-raising, Sir Robert Chote, chairman of the Northern Ireland Fiscal Council, referred to the “ongoing debate” about the need for more investment in water services.
NI Water, which provides water and sewerage services, recently warned that uncertainty of financial support and historic underfunding are having a serious impact on wastewater services, which is impacting on the construction sector.
Sir Robert Chote, chair of Northern Ireland Fiscal Council, giving evidence to MPs at the Northern Ireland Affairs Committee at the House of Commons (UK Parliament/PA)
Water and wastewater infrastructure in the region have been described as in urgent need of upgrade.
While non-domestic water charges already apply in Northern Ireland, there has been strong political opposition to introducing domestic water charges.
Sir Robert referred to a recent determination from Ofwat, the regulator for the privatised water and sewerage industry in England and Wales.
He told the committee: “At the end of last year, Ofwat said that the performance of the water companies in England and Wales wasn’t good enough and has basically sanctioned them to increase charges by 20-50% in real terms over the next five years, presumably on the basis that that will fund investment which can improve both sewerage and water provision performance.
“How does the (Stormont) Executive think about what Northern Ireland Water can do in response to that?
“They are not, I would imagine, going to be terribly keen on seeing that sort of increase in non-domestic bills.
“It would be very difficult for DfI (Department for Infrastructure) to find the money to have a subsidy that would cover what would be a really big increase in domestic charging as well.”
He added: “It is one area where you can point to a particular area where essentially through a different model, because these are private, in the case of Welsh Water mutual companies, but they are charging their consumers more to put more money in.
Stephen Farry said there was pressure building on Stormont parties over revenue-raising (Liam McBurney/PA)
“In Northern Ireland you have a publicly owned water company that gets 20% of its money from non-domestic charges and 70% from a subsidy that comes out of the Executive’s pot.
“On the face of it, over the next five years, it looks harder for NI Water to be able to match the sort of increase in investment that Ofwat clearly thinks is necessary in England and Wales.
Former Alliance Party MP Stephen Farry, now co-director of the Strategic Policy Unit at Ulster University, said “there is a lot of pressure building” on Stormont parties over revenue-raising.
He added: “Clearly the view of the Treasury is Northern Ireland should be doing more on revenue raising.
“I think there is a tacit acknowledgement of that across most political parties and the Executive that they need to be inching into that territory.
“The counterpart that is often raised is with a cost-of-living crisis that people push back and say in the context of pressures on households imposing some of these measures would make life very, very difficult so don’t do it at this particular moment in time.”
He added: “In practice, that gap will have to be closed because it is one of the levers the Executive has.”