WHILE WE ARE being treated to a debate that weighs up which tax should be cut by how much, the Government is preparing to introduce a highly regressive tax; namely, the water charge. While there has been a lot of discussion about how much water is used in showers, brushing teeth and washing clothes (and how much it will cost us to do those things), there has been little discussion about how this charge will impact on different income groups.
User charges, like sales taxes such as VAT and excise, are inherently regressive. This is because those on low incomes spend nearly all they earn, while those on higher incomes are able to save. When the user charge is levied on a fundamental need – like water – it can be particularly regressive.
We won’t know the extent to which low income groups will suffer relative to high income groups until the first bills come in the door. But let’s look at another important service – bin collection. According to the CSO, in 2009/2010 (the most recent year for which we have these figures) the poorest 10% of households paid five times more for waste collection than the top 10% income group, measured as a percentage of their disposable income. Even middle income groups paid multiples of the top income group. And the figures also show that the top income groups actually paid less than the national average.
We know that waste charges are regressive, but will water charges follow the same pattern? Probably. Even though there is evidence to show that higher income groups use more water (and have larger households), the fact is there is an absolute minimum of water that all households have to use. That is what makes user charges like this regressive: they apply to basic needs, and therefore cannot be avoided.
Water poverty
The Government is providing a free water allowance for households and for children. In addition, they are providing a small supplement in the Household Benefits Package. Will this be enough? The ESRI has looked at the potential impact of water charges, although this was before the free water allowance was announced. Even with a supplement in the Household Benefits package, the impact on those at risk of poverty will be higher than on those who are not.
The ESRI also found that water poverty may emerge as a major issue among the lowest income groups – with water poverty being defined as paying 3% or more of disposable income on water bills.
Whichever way you look at it, water charges will be a greater burden on low and average earners than on high income groups.
But this shouldn’t really surprise us, given that the Government’s taxation policies – such as the increase in VAT and the abolition of the PRSI tax allowance – have targeted low paid workers and those dependent on social protection payments.
There is still time for the Government to act. Withdrawing the water charges would amount to a substantial ‘tax cut’ – a cut which would benefit everyone, including pensioners, the unemployed, lone parents and the low-paid would benefit from.
It would also be more economically efficient than some of the tax cuts currently being debated, since more money would be returned to the economy through consumer spending than a cut in the top rate of tax which would benefit primarily high income groups.
Government needs a wake-up call
We need a modern, state-of-the-art water and waste system. We need to finance that system in the most equitable way possible. But this system is neither equitable nor efficient. It will depress growth and consumer spending. And it may expose an unknown number of people to water poverty.
We need to give the Government a wake-up call. We need to make it clear that we won’t accept (and simply cannot afford) these charges, and that – at the next election – Government TDs will pay the price if they allow these charges to continue.
The national Right2Water demonstration on 11 October can provide that wake-up call. We can show the Government the level of opposition to the charges.
Democracy matters. And on 11 October you can exercise your democratic right and give the Government a simple message: stop the water charges, stop them now. If we act together, we will get our message across.
Unite is one of the organisations sponsoring the Right2Water campaign, which is organising a National Demonstration on 11 October, assembling at 2 pm at the Garden of Remembrance. The core message of the Right2Water campaign is that water is a fundamental human need and a basic human right, and that water user charges must be reversed.
Further information, as well as an online petition, is available at www.right2water.ie
Jimmy Kelly is Unite the Union’s Regional Secretary. Unite is one of the organisations sponsoring the Right2Water campaign, which is organising a national demonstration on Saturday 11 October, details of which are being announced at a press conference Thursday 2 October.
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