Patrick Nulty (Dublin West, Labour)
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I accept the assurances given this morning by the Tánaiste that it is his and the Labour Party's intention to retain the new water company that is due to be established in public ownership. However, we must be conscious that after the new company is established, at some point in the future, God forbid, Fianna Fáil might be back in power or Fine Gael might be governing alone and the option of privatising it will still exist.

I commend the Minister of State, Deputy Jan O'Sullivan, on the excellent work she is doing in the area of planning and housing. She is driving a very positive and strong reform agenda.

Wherever water charges have been introduced they have been regressive. That is evident from the statistics provided by the OECD. In England, 3.7% of the incomes of the bottom 10% of the population goes on water charges, whereas for the top 10% it is only 0.4% of their income. The same applies in France, Holland and Mexico. In the 1990s, KPMG assessed the economic rationale for installing water meters and found it to be uneconomic. It will cost approximately €800 million to install water meters. I ask the Government to review that expenditure and consider using that €800 million to invest in water infrastructure. That was done by Dublin City Council over the last few years and leakages have been reduced from 43% in the late 1990s to 28% now. It would also create jobs.

We should shift the balance in our approach to taxation. Unlike the Minister of State, Deputy John Perry, I believe indirect taxation is the most unfair form of taxation. It takes no account of people's incomes. We must move to a progressive taxation system, which means introducing a higher rate of tax for those earning more than €100,000 per annum and introducing the wealth tax which the Minister for Finance, Deputy Michael Noonan, told the House could bring in between €450 million and €500 million per year. There must also be recognition that, unlike what some people suggest, the citizens of Ireland are very responsible. They do not leave taps on left, right and centre.

We should use the funds in the National Pensions Reserve Fund to invest in water infrastructure and, where necessary, progressively increase taxation on incomes to pay for services. There must be a change of policy and direction, and that would be a progressive step. We should not introduce water charges.

Brian Stanley (Laois-Offaly, Sinn Fein)
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This week saw the announcement by the Minister for the Environment, Community and Local Government, Deputy Phil Hogan, of the establishment of Irish Water. This comes at a time when the working group of the Oireachtas committee on the environment and local government was in the process of concluding a report. The fact that it was made before that committee concluded its report is most undemocratic and shows a total lack of respect for the institutions of the Dáil.

The establishment of Irish Water will destroy local government and local democracy. We are told it will be a subsidiary of Bord Gáis, a semi-State company. It will not have any democratic accountability. Perhaps the Minister will explain how we could achieve democratic accountability for this body either to this House or to local councillors. The public will not have access to it; all people will have is an 1890 telephone number for it.

I am flabbergasted at the cost of the metering. A figure of €780 has been mentioned, or €39 per year over a period of 20 years. That is very expensive metering. Over 100 million holes will be dug in footpaths outside houses to fit meters that will not stop one drop of water from being leaked or conserved. Usage in England, where there are meters, and usage in this country are the same; in fact, it is slightly higher in many parts of England. It is far more effective to have district metering, which is already being used by county councils. Is the Minister aware of that? It is being used by councils such as those in Laois and Offaly to identify leaks in neighbourhoods and to manage the network. It is a far more effective way of doing it.

Yesterday, the Taoiseach said water services would be cut off to households who are unable to pay or will not pay the charges. This morning, the Tánaiste twice refused to distance himself from that comment when he was asked if he agreed with it. He refused to clarify that he opposed it. The conclusion one must draw is that people will have their water service cut off. This is really serious. Does the Minister not agree that the control and operation of these services would be better left with the local authorities? If we are going to create jobs, let them be jobs that have the positive legacy of fixing leaks and saving the taxpayers money. We must move to district metering, which is almost 100% complete in some local authority areas. We should also put in place proper building regulations to harvest and conserve water through methods such as dual flushes.

Jan O'Sullivan (Limerick City, Labour)
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I thank Deputies for raising this issue and I am happy to respond on behalf of the Government.

The overarching objective of our water reform programme is to put in place structures and funding arrangements that will ensure we have a world class water and waste-water infrastructure that meets all environmental and public health standards, can attract foreign direct investment and support job creation and maintenance in key sectors such as pharma-chem, IT and food and drink. Last December, on the basis of the recommendations of an independent assessment, the Government decided to establish a public water utility company, Irish Water, to take over the operational and capacity delivery functions of local authorities in the water services area. Further consideration has been given since then to whether Irish Water should be established as a new entity or whether existing bodies in the semi-State sector could undertake the functions. The outcome of this analysis is that Irish Water should be established as an independent, State-owned company within the Bord Gáis group. Irish Water will be a public utility, wholly owned by the State. I am anxious to reassure Deputy Nulty in that regard.

Establishing a new water utility under the umbrella of a mature semi-State company makes best use of existing resources and capabilities. This approach is also in line with Government plans to support economic growth by eliminating waste and duplication in public spending through rationalising State agencies. Bord Gáis Éireann has key capabilities that can be brought to bear in the establishment of Irish Water, including experience in operating as a utility in a regulated environment and a track record in raising finance, and has specific skills from its experience of transformation, customer relations, network management, metering and utility operation that can be quickly deployed to assist in the successful establishment and operation of Irish Water. The skills within the Bord Gáis group will be paired with experience and commitment to service in local authorities and the specific water and waste water capabilities that exist in local government to build the new organisation. In the initial phase, Irish Water will work largely through service level agreements with local authorities. It is envisaged that these arrangements would end in 2017 at the earliest. This will ensure a smooth transition to the new model and guard against the loss of local expertise. It will also mean the majority of staff will remain in the direct employment of local authorities for a considerable period.

The Government has decided that when charges are introduced, they should be based on usage, reflect a free allowance and have specific measures for people with affordability issues. This is the fairest and most equitable way to introduce charging.

Meter infrastructure installation will commence by the end of the year and the programme will be rolled out on an accelerated basis. This programme will create up to 2,000 jobs. Households will not be asked to pay for these meters or their installation through an upfront charge.

The details of the funding model, including decisions relating to the precise charging framework, the level of charges, the free allowance and measures to address the needs of those with affordability issues or medical needs, have yet to be finalised. These will be a matter for the regulator, who will be required to act in the best interests of the consumer and will engage in appropriate public consultation as the process develops, and for Government through the budgetary and Estimates process.

Patrick Nulty (Dublin West, Labour)
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I thank the Minister of State for her response. I will make two brief points. With regard to charges and the alteration in people's water usage, the people whose behaviour will alter least are those on the highest incomes. They will be able to afford the charge and, as economic actors, will be less sensitive to the introduction of a charge. By its very nature, the charge will have a greater impact on middle and lower income households.

Second, no member country of the OECD has introduced a water charge and done so in a progressive way. This type of tax must hit people on middle and lower incomes hardest. I encourage the Government to review its position before we go too far down this line. There is €4.7 billion in the National Pensions Reserve Fund. Using that money strategically over three or four years to invest in water infrastructure, in a child care system or in rolling out broadband would generate economic activity and allow us to deal with long-term infrastructural projects.

This initiative is being driven by Fine Gael. In its general election manifesto, the Labour Party, which was my own party, made it clear that it was not in favour of water charges. We need to make it clear to the Minister for the Environment, Community and Local Government that this is an unfair charge and to revise the position on it.

Brian Stanley (Laois-Offaly, Sinn Fein)
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It is good to hear from Deputy Nulty that at least one member of the Labour Party remembers the commitments given before the election. A huge amount of money will be spent without saving one drop of water. That is the fact. This very expensive process of putting meters outside every household will not stop the leaks in the system.

The Minister of State said why Bord Gáis is a suitable holder of this contract and why it is the most appropriate company to be the parent company of the subsidiary that will look after this service. In recent weeks, Sierra Support Services, a company owned by Mr. Denis O'Brien, secured a contract worth up to €60 million to become the sole provider for the installation, maintenance and testing of domestic boilers for Bord Gáis Energy. Can the Minister of State confirm that no discussions took place between Mr. Denis O'Brien's company and the Taoiseach or any Minister during the Taoiseach's recent visit to New York or at any time regarding the installation and maintenance of water or gas meters or any of the fittings associated with them?

Jan O'Sullivan (Limerick City, Labour)
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I disagree with both Deputies when they say this will not save water. I absolutely disagree with their contention that charging, over a certain level of free water, will not concentrate people's minds on saving water. People who are better off will not necessarily leave the taps on because they have a bit more money. One could not say the better-off are not engaged in recycling and the use of bottle banks, for example. Being responsible has nothing to do with being well off or not. I reject that contention. If people are tight for money and if turning off the tap will save money, they will do so. People I know who are tight for money will use whatever method they can to save money for themselves and their household. I reject the contention that this measure will not save water.

I can reassure Deputy Nulty that the Labour Party, and the Government in general, is committed to retaining this in public ownership. I can counteract what Deputy Boyd Barrett said this morning. There is not an EU liberalisation directive in this area. There are many examples throughout Europe of water as a public utility, such as Scottish Water and Eau de Paris. I reject the suggestion that this will lead to privatisation.

Bord Gáis Éireann is an independent semi-State company. The question raised by Deputy Stanley has nothing to do with what we are talking about today. I do not know what Mr. Denis O'Brien or anyone else has to do with the question.

I thank the Deputies for raising this matter. There has been a consultation programme and there will now be a detailed implementation plan. Any views expressed in the Dáil will be taken on board. There will be a long lead-in period when the various issues and constructive suggestions will be considered. I thank the Deputies and assure them that this is about providing good quality water, protecting consumers and ensuring we can create and maintain jobs.