On Thursday last week, the Infrastructure Minister announced that her Department will introduce a voluntary contribution scheme for wastewater infrastructure. This, she says, “will help unlock more residential and commercial development”.
Northern Ireland’s crumbling wastewater infrastructure has been one of the most significant challenges facing the Executive since its return over two years ago. The underfunding of NI Water over many years has resulted in thousands of developments in over 100 areas unable to connect to the network, creating a significant barrier to economic growth and housebuilding.
What actions have been taken on wastewater infrastructure?
In a consultation last year, the Department for Infrastructure (DfI) proposed two models: a voluntary contribution and a compulsory levy. The first would allow developers to pay some or all of the costs for wastewater upgrades in places where they wish to build. The second would introduce a fee paid by developers into a ring-fenced fund to unlock connections across Northern Ireland on a prioritised needs basis.
Developer contributions are a part of the Minister’s ‘three-pronged approach’, alongside securing additional wastewater investment from the Executive and introducing the Water, Flooding and Sustainable Drainage Bill. There has been some progress on these: £433.7m was allocated in the Finance Minister’s draft multi-year budget for wastewater connections and the Bill is currently in front of the relevant committee.
What has the minister decided?
The voluntary contribution scheme allows developers to pay to upgrade or replace NI Water’s infrastructure in areas where it is needed. As this is voluntary, it is up to developers whether or not they wish to pay, and where they will focus their attention.
The consultation suggested two methods of voluntary contribution: a direct payment or a financial bond. It appears that the Department have opted for the first of these, allowing developers to pay directly to unlock capacity.
Legislation will be required to enact this decision, which will need to be tabled by the Minister on behalf of the Executive quickly to ensure it is sufficiently scrutinised and passed before the end of the mandate.
DfI will explore compulsory levies further, informed by the outcomes of this voluntary scheme.
The Minister has consistently opposed calls to introduce water charges for Northern Ireland households, which has greatly restricted the set of options available to her when considering how to source greater funding for water infrastructure.
What have industry leaders said?
Build Homes NI have pointed out the £2bn deficit faced by NI Water, as well as the fact that the consultation itself stated that developer contributions would not be enough to solve the issue. They suggest that the scheme may only bring in around £10m, well below the deficit faced by NI Water. They have called this a “distraction from the fundamental problem which is NI Water’s broken funding model” and said that rising costs will inevitably be passed onto consumers, creating a “de facto ‘water tax’”.
The Construction Employers Federation (CEF) have said that developer contributions will not “address the scale of the funding challenge” but that “removing the legislative barrier to upgrading NI Water assets is a positive step”. They have previously called for a £1.25 per week average charge on households to fund wastewater improvements.
Pivotal’s analysis
In our response to the consultation, we made clear that the need to reform wastewater funding is urgent, following authoritative reports from the Northern Ireland Fiscal Council as well as from Grant Thornton and Turley, echoing their finding that the issue is fundamentally about needing to secure an ongoing source of finance for NI Water.
On the voluntary contribution, we noted potential adverse impacts across a number of important areas. As the contributions will be geographically patchwork, there is a risk that capacity is unlocked in some areas and not in others, potentially contributing to further regional imbalance. Developers are also likely to focus their attention on more expensive homes where they can get a return on investment, driving up house prices and perhaps neglecting social and affordable stock. The consultation document recognised this, however more detail is needed as to the Department’s position on this now that the policy has been adopted.
With around a year left in this mandate, time cannot be wasted. Legislation should be tabled soon to allow for sufficient scrutiny by the Assembly and the Infrastructure Committee. Rushed legislation will result in poorer outcomes so the Minister and DfI must ensure that it is scrutinised and passed in good time.
The Minister has stated that developer contributions alone would not solve the problems, and it is unclear whether the ‘three-pronged approach’ is enough to stabilise NI Water’s funding stream. The Department, and the Executive as a whole, should reconsider its position on alternative ways to raise funding for NI Water, including methods to raise revenue for water through the rates system. For example, the Grant Thornton and Turley paper argued for “re-establishing the explicit link between rates and water” through an infrastructure levy, with options from £98-398 per year in the rates bill.
We recognise that it is a difficult, potentially unpopular decision, however a long-term solution is needed to shore up NI Water’s funding, unlock wastewater capacity, and allow for homes to be built and businesses to grow.
