Simon Coveney (Cork South Central, Fine Gael) | Oireachtas source

For next year, in terms of the reallocation, we have said that of the balancing fund or the redistribution fund, whatever one wants to call it, the decisions we have made will ensure that, effectively, no local authority will get less than they got last year. However, there is still an opportunity for local authorities. Some have made the decision; others will make it in the next few days or weeks. There is an opportunity, if they want it, to consider increasing funding streams from the LPT. That is the only point I would make on that. I do not want to over-emphasise it.

I will address some of the other issues. Senator Coffey raised the costs arising from the suspension of charges. Having formerly been in that Department, I am sure there are various things happening that are frustrating for the Senator to watch, given some of the challenges, mainly political, that he had to deal with around water. I will shortly make a submission to Government on the 2016 costs arising from the suspension of water charges and on the potential cost in 2017 in different scenarios. The 2017 position will be dependent on the report of the expert commission on funding domestic water services and the consideration of that report by the Oireachtas. That is only a guesstimate at this stage.

In summary, for 2016, the previously envisaged operating subvention for Irish Water this year was €479 million. Irish Water has estimated the shortfall in net domestic revenue from the suspension of water charges to be in the order of €181 million for 2016, bringing the total subvention requirement to €660 million. The cost of the additional €181 million will be met through the savings on the water conservation grant, which now will not be paid - that is €110 million; the conversion of an already provided working capital loan to Irish Water of €58 million, which was already factored into the budget; and savings of €13 million arising elsewhere in the local government fund.

Essentially, because we have matched off the water conservation grant estimate with the reduced revenue stream due to the suspension of water charges, along with the €58 million fund that was effectively a working capital loan to Irish Water from the Department, the shortfall is €13 million after that, which we need to find in savings this year, but we will not have the benefit of that next year.

We could fall back on it this year. Let us be honest about this. If the Oireachtas decides to do away with water charges, we still need to progress and deliver on the significant capital expenditure programme that Irish Water needs, and that will have to come through other revenue raising and, I presume, general taxation. That would limit our ability to be able to spend in other areas and clearly undermines the water conservation incentive that comes with having some link between what people pay and how much water they use. That is not to mind the other legal issues around water framework directives and the rest of it. That is the issue in terms of revenue streams. We will have a long debate about that once the commission reports. I know people have strong views on it and I do not want to trigger a debate on water. We are covered for this year because of the water conservation grant and the €58 million earmarked for a capital support programme. We will be able to find the €13 million shortfall.

The potential scenarios for 2017 will be considered as part of the 2017 budget. We will have an opportunity at a later date to discuss those when the commission reports or, potentially, in the context of the budget. We must plan for the different scenarios. The choices we make have big consequences. Regardless of the way this is cut, we must invest billions of euro over the next five or six years in water infrastructure and it must be paid for. The only question we must decide is whether it is to be paid for through general taxation, a combination of general taxation and direct charging that tries to incentivise conservation and water management or by reverting to the previous charging system. These are the choices on which we want the commission to make recommendations.