Water privatization

Karl Stein · 25-11-2014 7:14pm

Permabear wrote: »

This post had been deleted.

So they've decided that this relatively short sample length where private companies took over billions worth of water infrastructure that had been already paid for by the public is now deemed 'private' sector efficiency? What would the costs have been if the 'private' sector had not inherited the infrastructure that has been built over generations?

Valmont wrote: »

A privatised IW would indeed be beholden to shareholders - but shareholders are beholden to consumers.

In an ideal world.

The £4.2bn cost of the Thames Tideway Tunnel project is to be wholly funded by Thames Water customers. This has angered some customers who believe the company has benefited from tax breaks sanctioned by industry regulator Ofwat, when it was allowed to add huge amounts of debt to its balance sheet reducing its tax payments while at the same time allowing its shareholders to receive large dividends - money they feel should have been spent on the Thames Tideway Tunnel.

Wikipedia.org

Permabear wrote: »

So why is this option such a nonstarter in Ireland?

See above.

Permabear · 25-11-2014 8:01pm

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Karl Stein · 25-11-2014 10:04pm

Permabear wrote: »

This post had been deleted.

Deary me. I introduce some history and I'm the one that needs the history lesson? Good man yourself.

For much of England's modern history, fresh water was supplied by private water companies, such as the New River Company, which began supplying the city of London and other central areas in 1603.

The supply then and the supply after nationalisation is incomparable. Also, you'll note that King James the 1st bankrolled the New River project to the tune of 50%. At best it would be described as a PPP now.

private water companies in London were merged and nationalized with the Metropolis Water Act 1902, which created the Metropolitan Water Board; it was re-privatized again in 1989. So, in London's long history, water has been a public utility for just 87 years.

The Private companies were inadequate and were supplying people with dirty, diseased water until they were regulated (oh no regulation!) in the 1850's. You'll note that the vast majority of people in large cities lived in squalor with no running water or sewage.

After nationalization:

The Metropolitan Water Board opened the East London Waterworks reservoirs Banbury Reservoir and Lockwood Reservoir, and the Bessborough Reservoir, Knight Reservoir and Island Barn Reservoirs at Molesey. It also opened the Kempton Park Reservoirs in around 1907.

In 1910, extraction facilities were opened at Hythe End and the Staines Reservoir Aqueduct was built to supply water to Hampton. The Metropolitan Water Board Railway was opened in 1916 to carry coal from the river at Hampton to Kempton Park. An engine house with powerful steam engines was opened at Kempton Park in 1929, which has now become Kempton Park Steam Engines museum.

The MWB opened a succession of reservoirs - King George V Reservoir, (Lea Valley) in 1912, Queen Mary Reservoir (Ashford) in 1925, King George VI Reservoir (Stanwellmoor) in 1947 William Girling Reservoir (Lea Valley) in 1951, Queen Elizabeth II Reservoir (Molesey) 1962, Wraysbury Reservoir 1967, and Queen Mother Reservoir (Staines) 1976.

I'd imagine the vast majority of water to the home infrastructure was laid in the above period too.

Permabear · 25-11-2014 11:38pm

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micosoft · 25-11-2014 11:59pm

mrbrianj wrote: »

Think of the savings and efficiencies a private company implement on IW. If the Energy regulator also did their job, privatisation would be great.

But who would invest? posters on the water charge thread indicate that up to 20 billion need over the next 10 years, but only €160 per year per household. Long term investment of 30 - 40 years would hardly see a return

It will be funded by both state coffers and direct payments. Have no doubt that in ten years time we will be paying the full economic cost of water directly to IW.

As for who would invest, the same that invest in Utilities generally. Utilities tend to make low (about 3-5%) but steady returns on investment as they are exceptionally capital intensive but relatively immune to economic cycles. Therefore pension funds tend to put a significant proportion of their portfolio into utilities. Which is good for private sector investors.

Again, we learnt our lesson with Eircom and with both Electricity and Gas grid are maintained in a heavily regulated entity that others can utilise. This brings the best of competition together with the natural monopoly that is a utility grid network.

Karl Stein · 26-11-2014 1:14am

Permabear wrote: »

This post had been deleted.

No, no I can use google too.

If you did, you'd know that England and Wales still had over 1,400 separate water supply systems by 1945; massive consolidation of water services only began in 1973, with the creation of regional water authorities.

Call me a sceptic but I simply don't believe you knew this until you googled it after my post. Well done on the googling though.

We were previously talking about the supply to London. Of course there will be multiple water supply systems because all the fresh water in England and Wales does not collect in one gigantic hub lake that supply pipes spoke out from (I didn't have to google that response)

But thanks to decades of socialistic mismanagement, the UK in the '70s was broke.

There you go with the reductive propaganda again. 'Socialistic mismanagement'.. nothing to do with WWII, a collapsing empire, huge debt, the oil crisis, British industry in decline, (Rolls Royce was bailed out by the state and is now one of the World's great 'private' companies btw).

Investment in water services remained inadequate until the late 1980s, when privatization produced increased capital investment in water and sewage systems as well as significantly improved quality of drinking water.

And then then they got it all for a song because of neoliberal orthodoxy. From the very PDF you're found there recently:

The industry was privatised in 1989 ... technically, this involved the transfer of assets and personnel of the 10 water authorities into limited companies. This was accompanied by the raising of capital by floating the companies on the London Stock Exchange, a one-off injection of public capital, the write off of significant government debt and the provision of capital tax allowances.

It is a scientific fact that the quality of drinking water in England has never been as good as it is today, 25 years after privatization.

Whoop-de-doo - they built on the successes of the past. You don't just get to start the narrative in 1989. Also stringent regulation (oh noes Govt/EU regulation) and increasing awareness of environmental issues tends to do that. Moreover there is no reason it could not have happened had the political will been there. I'm sure I could easily google numerous examples of increasing quality in non-private suppliers.

As much as you might reflexively rant at any mention of private enterprise your general tendency across various threads

it's legitimate to ask why privatization, which has worked well in England, has been ruled out as an option in Ireland

Ah but it wasn't just privatisation that brought England and Wales to where they are you see. You're working from ideological orthodoxy that private is always better and that private is solely responsible for clean drinking water. Both demonstrably incorrect.

without any debate, in favor of handing control of water services to a wasteful, incompetent quango.

You're answering your own question there. The fact that a billion euros is being flushed down the drain setting up a Quango is one of the issues that has people pissed off. Personally I believe that 1 billion would have been far better spent upgrading the water infrastructure by transparently tendering the work out to private contractors (OMG private!

)

That would have taken thousands of unemployed construction workers off the dole who'd be spending their wages in the real/local economy in restaurants, shops and bars which would have raised aggregate demand across the country.

FreudianSlippers · 26-11-2014 10:28am

Karl Stein wrote: »

That would have taken thousands of unemployed construction workers off the dole who'd be spending their wages in the real/local economy in restaurants, shops and bars which would have raised aggregate demand across the country.

So instead of €1.2bn (Euro - it's a proper noun and defined in legislation) on the books, creating a deficit of €7bn this year, you'd increase our deficit to €8bn and watch the Local Authorities piss it away as they have done for the past however many years?

Smart economic thinking there. :rolleyes:

dlouth15 · 26-11-2014 11:15am

It is really the creation of an additional usage tax that makes the government's position better off. The creation of an entity, where debt's can be run up "off balance sheet", is really just an accounting trick. The debts run up by Irish Water will still be Irish State debt and individuals will still have to pay to service it.

Having said that, there may be some efficiencies to he had from a national body dedicated purely to water as opposed lots of local authorities handling it.

The danger, of course, is that this body will run up unnecessary expenses, "gold plate" investment with extra costs and use this to justify higher and higher charges.

This problem is not solved by privatizing Irish Water, imo, because although a private company would seek efficiencies, the purpose of this would be greater profit for shareholders rather than savings for the water user.

karma_ · 26-11-2014 12:08pm

FreudianSlippers wrote: »

So instead of €1.2bn (Euro - it's a proper noun and defined in legislation) on the books, creating a deficit of €7bn this year, you'd increase our deficit to €8bn and watch the Local Authorities piss it away as they have done for the past however many years?

Smart economic thinking there. :rolleyes:

Roll your eyes some more, not like there hasn't been successful precedent for this brand of thinking before like.

Godge · 26-11-2014 12:09pm

karma_ wrote: »

Roll your eyes some more, not like there hasn't been successful precedent for this brand of thinking before like.

Such as?

hmmm · 26-11-2014 12:10pm

Why not get the best of both worlds and keep "water" in public ownership, but privatise the operation of the water company. Licenses to run the company could be handed out for 10 years at a time. The same model as Luas, which is the best, most efficient public transport system in the country as a result.

Permabear · 26-11-2014 12:34pm

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FreudianSlippers · 26-11-2014 2:01pm

karma_ wrote: »

Roll your eyes some more, not like there hasn't been successful precedent for this brand of thinking before like.

Go on... like...

Soldie · 26-11-2014 2:50pm

I always find it strange that those in Ireland dreaming of a democratic socialist paradise where everything is rosy are (a) unwilling to actually pay for it and (b) often unprepared to accept that, culturally, such a system is generally unsuited to Ireland.

The narrative seems to be that these 'punitive' water charges, added to the 'already crippling' taxes that people are paying, are enough to put people below the bread line. Ireland is a relatively low-tax country; the taxes I pay here in Germany are eye-watering by comparison, and I have to pay for my water on top of them. Anecdotally, people here are also far more system-orientated, and are more disposed towards paying a high price for publicly-provided services. This is certainly not the case in Ireland where mé féinerism is rife and the cute hoor is lauded. The prevailing logic seems to be that there are no ill consequences to screwing over the system, as if our laws are still imposed by the British.

You want a high level of services? Then be prepared to pay for them instead of buying into the populist idea that cutting politicians' pay and levying increased taxes on bankers and developers will cover the cost; it won't.

Karl Stein · 26-11-2014 5:39pm

All this is moot anyway. The Irish government should have been more fiscally prudent and built up a large surplus from the taxes they were taking in during the celtic pyramid instead of inflating the public sector and encouraging property speculators.

This is the wrong time to carry out large infrastructure projects. These grand infrastructure projects should be done when the economy is on the downturn to mitigate the neoliberal boom and bust cycle, New Deal style.

Sorry for busting up your circle jerk lads (not really sorry), I'll leave ye to it.

Macha · 26-11-2014 5:50pm

Karl Stein wrote: »

All this is moot anyway. The Irish government should have been more fiscally prudent and built up a large surplus from the taxes they were taking in during the celtic pyramid instead of inflating the public sector and encouraging property speculators.

This is the wrong time to carry out large infrastructure projects. These grand infrastructure projects should be done when the economy is on the downturn to mitigate the neoliberal boom and bust cycle, New Deal style.

Sorry for busting up your circle jerk lads (not really sorry), I'll leave ye to it.

Sure but the electorate was baying for tax breaks instead, and they got them.

This isn't a great time to carry out large infrastructure projects paid for by the state taking on additional debt. Hence, the creation of Irish Water.

Karl Stein · 26-11-2014 6:01pm

Macha wrote: »

This isn't a great time to carry out large infrastructure projects paid for by the state taking on additional debt. Hence, the creation of Irish Water.

It's going to come out of people's pockets one way or another. The Quango will just borrow on the strength of having a guaranteed monopoly and pass on the costs down the line.

Macha · 26-11-2014 8:24pm

Karl Stein wrote: »

It's going to come out of people's pockets one way or another. The Quango will just borrow on the strength of having a guaranteed monopoly and pass on the costs down the line.

Of course, but this is about the best way to finance the investments. I'm no economics expert but my understanding is the idea with Irish Water is that it can borrow money without that borrowing (or at least most of it) showing up on Ireland's national debt.

That's important for keeping our national debt below 3% of GDP, which is the threshold under the Maastricht Treaty, reinforced more recently by the Stability and Growth Pact.

So the implications are a bit wider.

Jolly Red Giant · 26-11-2014 8:34pm

Macha wrote: »

Of course, but this is about the best way to finance the investments. I'm no economics expert but my understanding is the idea with Irish Water is that it can borrow money without that borrowing (or at least most of it) showing up on Ireland's national debt.

That's important for keeping our national debt below 3% of GDP, which is the threshold under the Maastricht Treaty, reinforced more recently by the Stability and Growth Pact.

So the implications are a bit wider.

yes - it is an accounting stunt - and Ireland could, and should, ignore the Maastricht bullsh*t

dlouth15 · 26-11-2014 8:36pm

Macha wrote: »

That's important for keeping our national debt below 3% of GDP, which is the threshold under the Maastricht Treaty, reinforced more recently by the Stability and Growth Pact.

You mean deficit under 3%. The rule for national debt is 60% and the deficit will need to be a lot below 3% if we want to see a 60% debt/gdp any time soon.

But it is still an accounting trick. We are closer to meeting the pact rules, but just because the debt is on another balance sheet doesn't mean it isn't our debt.

Macha · 26-11-2014 8:49pm

dlouth15 wrote: »

You mean deficit under 3%. The rule for national debt is 60% and the deficit will need to be a lot below 3% if we want to see a 60% debt/gdp any time soon.

But it is still an accounting trick. We are closer to meeting the pact rules, but just because the debt is on another balance sheet doesn't mean it isn't our debt.

Yep sorry I meant budget deficit, not national debt. I also have a question over the costs of investment. Would it be cheaper to borrow as the state or as Irish Water?

Beyond this, however, I think the state has proven itself not to be interested in investing in our water system. Why? Well, it wasn't a vote getter, our politicians are interested in the next 5 years max and I also think because we didn't pay for water. So yes, bring on some private/semi-state investment, I say.

Karl Stein · 27-11-2014 3:26am

FreudianSlippers wrote: »

So instead of €1.2bn (Euro - it's a proper noun and defined in legislation) on the books, creating a deficit of €7bn this year, you'd increase our deficit to €8bn and watch the Local Authorities piss it away as they have done for the past however many years?

Smart economic thinking there. :rolleyes:

Hey Slippy, of all the people who've posted in this thread yours are the least contributory.

Congratulations.

FreudianSlippers · 27-11-2014 11:36am

Karl Stein wrote: »

Hey Slippy, of all the people who've posted in this thread yours are the least contributory.

Congratulations.

No, I'd say barking mad ramblings about increasing the national deficit is fairly non-contributory. Care to point out some other non-contributory posts I've made?

How many more euros (sic) do you think we can plunge into our wasteful system whilst still meeting our debt reduction target, or did you fail to even consider that when you were pulling €1bn out of thin air?

Naz_st · 27-11-2014 1:07pm

Soldie wrote: »

...Ireland is a relatively low-tax country; the taxes I pay here in Germany are eye-watering by comparison...

I've always assumed this (that people in Germany / France with "Good" public services, pay for it in higher taxes) but is this actually true anymore though? With marginal rates in Ireland of 52% (or 54% if you are a small business owner :mad: ), kicking in at €32,800 (less than the average industrial wage! ), I think for a certain household income (maybe 80k+) you might end up paying the same or less tax in Germany...

BoJack Horseman · 27-11-2014 1:18pm

Naz_st wrote: »

I've always assumed this (that people in Germany / France with "Good" public services, pay for it in higher taxes) but is this actually true anymore though?

This graph is old..... But I can't find a more recent one.

I believe the current stat is 36% of GDP (for 2013/14).

But as you can see, Ireland was for a very long time a low tax country.

We are now average.

If people think we get poor public services for our currently higher taxation, its down to a generation of underinvestment.

Soldie · 27-11-2014 2:31pm

Naz_st wrote: »

I've always assumed this (that people in Germany / France with "Good" public services, pay for it in higher taxes) but is this actually true anymore though? With marginal rates in Ireland of 52% (or 54% if you are a small business owner :mad: ), kicking in at €32,800 (less than the average industrial wage! ), I think for a certain household income (maybe 80k+) you might end up paying the same or less tax in Germany...

I simplified things a little bit in my previous post. Income tax rates aren't massively higher, but income tax constitutes less than half of what's deducted from your monthly pay cheque. There are also mandatory payments towards health insurance, unemployment insurance, disability insurance and a pension. On top of that, you've got the church tax (you can opt out, with consequences, but AFAIK most people pay for it). Joe Bloggs sees of €28,149.20 of his €36,000 salary, whereas Max Mustermann, who's on the same wage, sees only €22,426.08. The problem, as I see it, is that the average Irish person expect Germany-level services for Ireland-level prices.

Naz_st · 27-11-2014 2:51pm

Soldie wrote: »

I simplified things a little bit in my previous post. Income tax rates aren't massively higher, but income tax constitutes less than half of what's deducted from your monthly pay cheque. There are also mandatory payments towards health insurance, unemployment insurance, disability insurance and a pension. On top of that, you've got the church tax (you can opt out, with consequences, but AFAIK most people pay for it). Joe Bloggs sees of €28,149.20 of his €36,000 salary, whereas Max Mustermann, who's on the same wage, sees only €22,426.08. The problem, as I see it, is that the average Irish person expect Germany-level services for Ireland-level prices.

Yeah, at the lower end that's true, but higher up the salary scale it seems to go the other way. E.g. using 2 salary calculators (German, Irish) and leaving everything at their defaults, for a married couple with 2 kids, the tipping point seems to be ~82k (i.e. above this you take home more in Germany).

82k after tax Ireland: €53,769.00
82k after tax Germany: €53.751,21

100k after tax Ireland: €62,409.00
100k after tax Germany: €64.847,21

Incidentally, if there was an optional church tax here you might might a sudden wave of atheism taking over the country!

FreudianSlippers · 27-11-2014 3:11pm

Naz_st wrote: »

I've always assumed this (that people in Germany / France with "Good" public services, pay for it in higher taxes) but is this actually true anymore though? With marginal rates in Ireland of 52% (or 54% if you are a small business owner :mad: ), kicking in at €32,800 (less than the average industrial wage! ), I think for a certain household income (maybe 80k+) you might end up paying the same or less tax in Germany...

I'm not married, so my GF and I pay single tax rates, I've found chatting/comparing with friends in London and Berlin that once direct and indirect taxes are all taken into consideration, an Irish single taxpayer on anything between €60k-€150k is paying a lot more in Ireland than in London or Berlin.

FreudianSlippers · 27-11-2014 3:12pm

Naz_st wrote: »

Yeah, at the lower end that's true, but higher up the salary scale it seems to go the other way. E.g. using 2 salary calculators (German, Irish) and leaving everything at their defaults, for a married couple with 2 kids, the tipping point seems to be ~82k (i.e. above this you take home more in Germany).

82k after tax Ireland: €53,769.00
82k after tax Germany: €53.751,21

100k after tax Ireland: €62,409.00
100k after tax Germany: €64.847,21

Incidentally, if there was an optional church tax here you might might a sudden wave of atheism taking over the country!

Churches should have to pay Corporation Tax IMHO.

hfallada · 27-11-2014 7:24pm

Naz_st wrote: »

Yeah, at the lower end that's true, but higher up the salary scale it seems to go the other way. E.g. using 2 salary calculators (German, Irish) and leaving everything at their defaults, for a married couple with 2 kids, the tipping point seems to be ~82k (i.e. above this you take home more in Germany).

82k after tax Ireland: €53,769.00
82k after tax Germany: €53.751,21

100k after tax Ireland: €62,409.00
100k after tax Germany: €64.847,21

Incidentally, if there was an optional church tax here you might might a sudden wave of atheism taking over the country!

A better comparison is €19,200 per year in Germany. Its €13797.24 after all the deductions which are huge eg Health insurance at 8.2%, which still requires some Co-Payment at the pharmacy(which is funny considering some people on medical cards think its a disgrace they have to pay €2.50 an item).

Where as €19,200 in Ireland is €17,403.00 after all the income taxes. There is huge difference between Ireland and Germany at lower levels of income. Its because Ireland is more progressive with income tax.

Also Germany has VAT of 7% on Food,which is 0% in Ireland on most food. Although due to the narrower tax base, Ireland has to charge 23% VAT

Water privatization

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