Written answers

Tuesday, 11 November 2014

Department of Finance

Semi-State Bodies

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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186. To ask the Minister for Finance the market test criteria that Irish Water and other semi-State companies must meet in order for their costs not to be included in the general Government accounts; and if he will make a statement on the matter. [42850/14]

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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187. To ask the Minister for Finance in a situation where a commercial semi-State collected, as distinct from billed, less than 50% of its revenue from non-State source, if it will still pass the market test not to be included on the State's books; and if he will make a statement on the matter. [42851/14]

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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217. To ask the Minister for Finance when EUROSTAT will make a determination as to whether Irish Water meets the criteria as an off-balance sheet entity; and if he will make a statement on the matter. [43204/14]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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I propose to take Questions Nos. 186, 187 and 217 together.

At national level the CSO are responsible under EU regulation for ensuring that all units within the economy are classified according to the rules set out under the European system of accounts (ESA2010). Eurostat monitor this role through documentation, including the excessive deficit procedure (EDP) inventory for Ireland, and through biennial dialogue visits. Eurostat are the ultimate arbiters on the classification of units in relation to EDP and other Government Finance Statistics.

The market/non-market test, as described in the ESA 2010, determines if a government controlled institutional unit is a market producer. To determine this, Irish Water or any other semi state company, must sell its products at an economically significant price which, in practice, would be assessed if the sales of the producer cover a majority of the production costs over a sustained multi-year period. The plausibility of the semi state operating as a market producer is also tested by assessing the level of sales dependent on government funding. In the case of a new public enterprise, the classification will be based on the business plan and special attention will be given to check whether the unit becomes a market producer in a short period of time. The market status of government controlled institutional units is assessed on a regular basis.

As per standard accruals accounting all billed sales will count towards revenue. If in the future bad debts are written off Irish Water may require new revenue streams to make up the shortfall. This could lead to an increase in the government funding which will be assessed in the market/non-market and plausibility tests.

Once decisions are finalised regarding the structure and financing of Irish Water, a submission will be made to the CSO and Eurostat regarding the classification of Irish Water. Until this submission is received the timeline cannot be finally confirmed. It would be expected that a decision will be made by the time of the next EDP reporting date (end March 2015).

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