Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

A number of measures were announced on budget day to improve the overall affordability of water charges. The objective of these supports is to assist households which pay their water bills. Following the announcement on budget day, officials from the Department are working closely with their colleagues in other relevant Departments and agencies on the development of the processes that will be employed to deliver the relief. As I stated on budget day and subsequently, we will design the measure as broadly and efficiently as possible to ensure the relief reaches all households which pay their charges. While clearly there are cost implications for the administration of any relief, it is not possible to quantify the cost of administering the relief at this stage.

In the design of the relief we must be cognisant of the impact on Irish Water of Eurostat's market corporation test. As the Deputy is aware, the advantage of keeping Irish Water off the Government balance sheet is that the necessary investment in the water infrastructure in the country can be made by the utility without impacting on our deficit or debt targets under the Stability and Growth Pact.

More generally, in terms of the impact of water charges on the public finances, as the revenue from water charges is considered to be outside government, it has no impact on general Government revenue. Savings will accrue to the Exchequer over time as a result of a lower subvention from the Exchequer. As included in the summary of budget measures, the cost of tax relief at 20% on water charges up to a maximum of €500 per annum will be €40 million in 2016.

As Irish Water is considered to be outside government, expenditure by it does not impact on general Government expenditure. If tax relief was provided at source, Irish Water could fail the market corporation test and would, therefore, be classified within general government. Assuming that the operating and capital expenditure plans of Irish Water remained unchanged, the deficit would increase by between €500 million and €600 million, or 0.3 percentage points, in 2015. Separately, with regard to the impact on debt, all borrowings from third parties undertaken by Irish Water would be added to the outstanding stock of sovereign debt.

See this speech in context