Social Justice Ireland is an organisation of individuals and organisations all of whom are committed to building a just society, which it understands as a society where human rights are respected, human dignity protected, human development facilitated and the environment respected and protected. The environment is an integral part of our raison d’être and we are happy to be invited by the committee to speak on this issue and present some of our ideas on it. I hope what we have to say will be of use to the committee. We will be more than happy to answer questions and with any subsequent follow-up the committee may wish to have.
We believe the introduction of water charges will have a major effect on people. We thought it important that the committee be made aware of the scale of poverty that exists in terms of the working poor and those with no income from a paid job in the household. We will make a case that people are in a situation that must be addressed so they are not further disadvantaged by the introduction of water charges.
The same definition of poverty has been used since 1997 in the Government's own anti-poverty strategy. That definition gives a good understanding of poverty - that people live in poverty if their income and resources are below what would be required to live life with some basic dignity. When the definition refers to resources, it does not refer to just material resources but to cultural and social resources.
When people talk about the numbers of people or households in poverty, the question arises as to what is the poverty line. The poverty line is measured in an agreed manner in all 27 EU countries. Every one of them has the same methodology agreed. It lines up all of the people in the country on the basis of income, starting from the poorest to the richest. It takes the one in the middle, although that is not the average, the amounts are not added up and divided by the number, and the poverty line is set at 60% of the middle value. In 2011, that means for a single person, the poverty line is at €222 per week, or under €11,000 per year. For a household of four, with two adults and two children, it would be €515 per week, less than €27,000 for a household of four per year. That differs for different countries because the line up of income differs and the middle income is different.
The percentage of the population below the poverty line was 14.1% until a couple of weeks ago. In the figures published two weeks ago by the CSO, the poverty line has fallen by more than 10% but the percentage of the population below it has increased from 1.4.1% to 15.8%. While the poverty line is falling, the percentage of the population below it is increasing. The CSO also pointed out the gap between the better off and the poor has widened dramatically. Among those who study these things, the results have caused consternation because the numbers have escalated so quickly.
These things are measured by taking the top 20% and the bottom 20% and looking at relationships between the sets of income. Last year, the top 20% had 4.3 times the income of the bottom 20%. This year, the top 20% has 5.5 times the income of the bottom 20%, an increase of more than a quarter in a single year. That level of growing inequality is staggering and should be seriously noted because of its impact. The number of people in poverty is also important. Forgetting about percentages, some 723,840 people were at risk of poverty in 2010, which is the highest number since 2005. It had been reducing and it was down to 628,761 in 2009, which means there has been an increase of approximately 100,000 in a year. People are aware that more children are at risk of poverty and there are a number of other important matters, but the critical issue with water charges is to recognise that of all the households at risk of poverty almost four in ten are headed by a person with a job - these are the working poor. It is important to understand that many poor people live in households and have jobs. If they are already in poverty requiring them to pay a water charge will hit them very strongly and we will come to our proposals on that in a moment.
As I already mentioned there is significant inequality. There is one other figure that might be useful when considering where to put the hit, if one likes. The richest 10% of the population has more than a quarter of the total income. By contrast the bottom 10% gets 2.39% of the total income. It is clear to us that there would be no fairness or justice in having a flat charge, for example, for water. There have been a number of suggestions but we cannot ignore that poor households could have taken eight different hits. In his opening remarks, the Chairman mentioned that the budget had been tough because of the difficult situation in which we find ourselves but it was also because of the choices made by the Government. The following changes were made: a flat rate household charge of €100; an increase in the carbon levy of €5 per tonne, which will have impact; and a reduction in the fuel allowance from 32 weeks to 26 weeks. The cost of gas and electricity both increased by more than 20% in the past year but now the budget has reduced the value of the fuel allowance by more than 20%.
There has been a 2-percentage point increase in the rate of VAT. Much of the commentary on the budget is that this will not have any great effect on poor people because it will apply to only luxury goods etc. However, we are talking about adults' shoes and clothes, essential toiletries, light bulbs and a range of ordinary day-to-day items people will require. We published our research and analysis on the budget which we sent to Deputies and Senators the following day. On page 3, we set out the research showing where the hit from the VAT increase will be greatest felt. The most surprising thing is that people in the bottom decile, who have 2.39% of the total income, spend more than 14% of their total income on VAT and more than three quarters of it is on VAT at the standard rate which is now to become 23%. While this is not an argument about the budget, those households will also have a fairly sizeable hit as a result of the VAT change and that needs to be put into the frame.
There is a projected increase of 1.9% in inflation, which will basically neutralise the elimination of the universal social charge for those whose income is below €10,036 a year. There will be increased public transport fares, an increased drugs payments scheme threshold and an increase in school transport costs. Those are eight different hits to be absorbed by the same households that are already in poverty. This is an issue of substance about which we need to be careful.
I will now outline our recommendations. We do not believe water should become a commercial issue. For example, we do not believe it should be privatised for the purposes of making profit. There are many examples around the world where that does not work out and where people lose out as a result. Nor do we believe it should be a fundraising system for the Government to deal with budgetary balancing. Water services should be developed in such a way that they pay for themselves. There should be an allocation of 150 litres per day without charge for each adult in a jobless household in receipt of social welfare payments. We picked 150 litres because that is what is acknowledged in the literature as being more than sufficient. In a jobless household that depends on social welfare, every person should have 150 litres per day. There would need to be adjustments for people with disabilities or who are ill and for children. Households below the poverty line, which include a person with a job, should be also entitled to the same allocation.
In addition to the issues I already mentioned of them being in poverty, if unemployed people who take up jobs have to pay for water they did not pay for previously, it becomes an unemployment trap. That issue needs to be addressed and we would simply exclude it. There should be a charge for water used above the threshold amount. That is basically to try to encourage the preservation of water because we understand almost half of the water in the country goes missing and is not accounted for. For households only slightly above this poverty-line threshold there should be a very low rate after that basic free allocation. This charge should be calculated on a sliding scale as people's income grows. We would say it should be a quarter of a standard, half a standard, three quarters of a standard and eventually there would be a standard payment that people would pay after getting a basic allowance.
Before water charges are introduced it is crucial that the Government puts in place a water system that is fit for purpose. The issues that need to be addressed include: leakage, which accounts for 36% of total usage at present; difficulties in implementing river basin management; the 52% collection rate for non-domestic water charges; and the inconsistent water quality in different regions. Water charges should not be introduced until Ireland has a water system that is fit for purpose, which can support the demands placed on it, which does not lose 36% of its water to leakage, and where quality and river basin management are consistent. A future Irish water company must not be allowed to turn into a cartel that charges exorbitant prices while paying its employees huge salaries. The experience of the United Kingdom, of which members probably are aware, is not an approach that should be repeated here. The water executives there privatised the operation and paid themselves a fortune but the ordinary punter has wound up paying the bills. In addition, revenue collected from future water charges should be ring-fenced to support poor and low income households in that context, as well as environmental and sustainable development and the development of a green economy. In addition, we think the Government might consider an important idea, albeit one that is a little to the side of this issue, namely, the development of shadow national accounts, by which we mean the real cost of environmental pluses and minuses that are included in such accounts. Examples of them may be found in other countries and we would benefit from that. At present, one could increase GDP by spending a great deal of money on generating and then wasting water. The more water one generated, the more one would increase GDP. However, this does not appear sensible to us, because one actually is losing water. There is something wrong with the GDP measurement in this area, as there is in so many other areas. We argue that the idea of shadow national accounts also would help in this context.
It is important to make the point that the proposed Irish water company must not be used to pay interest on loans that are used to prop up the banking system. Hopefully this is not what was envisaged but we certainly would not support it. In addition, it must have the capacity to manage periods of water stress such as drought and the management of the system must be in the best interest of the public, as water is a public resource.
Basically, as water is a public resource, there should be a minimum allocation of water per person per day that is without charge. Adequate resources must be made available to support poor and low income households, as I outlined earlier. The Government should provide subsidies to households to encourage the purchase of water-efficient appliances. The infrastructure should be modernised and improved before a system of charges can be implemented and, finally, revenue from these charges must be ring-fenced to prevent them from simply becoming increased Government revenue to be used in other areas.
