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Northern Ireland executives face the “inevitable” prospect of having to start charging water to fund their infrastructure needs, according to the local budget watchdog.
The warning on Tuesday came from the independent Finance Council of Northern Ireland a day before the UK government’s spending review. In this review, local Stormont executives hope for an increase in funding from London.
The region’s tense finances are hampering much needed investments in infrastructure. Several large new housing developments are on hold as publicly available Northern Ireland water cannot provide sewage services.
Northern Ireland is the only part of the UK where households are not billed for water use, and Stormont is opposed to such a move.
“Additional revenue growth from domestic water charges and/or other sources appears inevitable when NI Water is given the necessary resources to provide high quality, environmentally sustainable services and to support residential and commercial development needs,” the Finance Council said in its report.
Hilary Ben, UK’s secretary to Northern Ireland, told the Financial Times last week.
Northern Ireland is primarily funded through bloc grants from the UK government. It will receive a record £18.2 billion in 2024-25. The formula based on this increased from the previous £121 to £124 for every £100 spent in the UK.
However, Finance Council member Esmond Birnie said that the formula is expected to be promoted again, as Farm’s grants (funded by the EU and funded by the UK government after Brexit) are now Stormont’s responsibility.
“This will be a challenge as we have three to four times the amount of farming per person that we have at least one of England,” Bernie told FT. “It needs adjustments (to the formula), but how generous will it be? It’s probably 124-127-128 pounds.”
Ben refused to provide details of Northern Ireland’s measures in his spending review.
Ni water is just one of many competing pressures on Stormont’s tense finances. The region has the UK’s longest waiting list for health services.
The Finance Council said NI Water’s funding model is “unique and increasingly unsustainable.” Instead of domestic water bills, they receive around £300 million a year from Stormont’s budget.
Local utility regulators believe NI Water will need to invest £1.5 billion before the end of the current budget period in 2028, but Stormont’s infrastructure division recommends planning a “rational worst-case scenario” of £992 million capital funds.
Ni Water estimates that it will take an average seedling investment over 18 years to address the infrastructure backlog.
When NI Water was installed in 2007, Northern Ireland intended to introduce water charges, but postponed them due to the financial crisis.
NI Water Finance Director Ronan Larkin said utilities “do not defend fees – we are agnostic.”
“There’s really no silver bullet in terms of making more money,” said Sir Robert Choat, chairman of the Finance Council. “We believe the trajectory is unsustainable even if we don’t have any income from somewhere.”
However, due to budget constraints of the UK government itself, he added: “It’s very difficult to imagine it coming from the UK government.”
