Water system shortfalls could cost economy almost £11bn
Northern Ireland remains the only region in the UK where households do not pay directly for their water services.
A recent study indicates that insufficient investment in Northern Ireland's water infrastructure could result in a loss of nearly £11 billion in economic growth by 2040.
The study was commissioned by organizations representing the construction industry, housing associations, and the Northern Ireland Chamber of Commerce.
Ongoing underfunding of NI Water has caused a deficit in wastewater infrastructure, which is restricting housing development and other economic activities.
The report revisits the proposal of introducing a modest household levy to provide NI Water with a stable funding source.
It estimates that an average annual payment of £65 per household could substantially improve the situation.
Political parties at Stormont oppose any charges on households for water services.
Instead, the Infrastructure Minister has proposed voluntary contributions from developers alongside technical measures aimed at increasing wastewater capacity.
A spokesperson for the Department for Infrastructure stated that Minister Liz Kimmins will not impose water charges on "hard pressed families in the midst of a cost-of-living crisis."
The 'success forecast'
The potential economic loss was calculated by economist Andrew Webb from the consultancy OCO Global.
Using economic modelling, Webb assessed three scenarios:
- A baseline forecast based on historical growth trends
- A constrained forecast reflecting limitations on development due to wastewater capacity restrictions
- A success forecast representing the economic trajectory if wastewater constraints were progressively eliminated
The "success forecast" assumes the implementation of a household levy to fund water system upgrades.
Webb clarified that his analysis does not assume the funding mechanism is without cost.
"Instead, he suggests it would reduce household disposable income and consumer spending in the short term, followed by a medium-term uplift associated with a stronger economy."
He further explained that the modelling reveals "a cumulative effect of development being slowed, diluted or displaced over time," resulting in economic output being £10.9 billion smaller than its potential by 2040.
How is NI Water funded?
Northern Ireland is unique within the UK as households do not pay directly for water services.
NI Water is funded through a government subsidy exceeding £300 million annually, allocated from the Stormont Executive's budget.
Since its establishment, NI Water has been underfunded relative to the requirements set by the independent Utility Regulator.
Earlier this year, Infrastructure Minister Liz Kimmins announced plans to introduce a scheme allowing housing developers to contribute towards the cost of upgrading wastewater infrastructure in areas targeted for development.
The opposition Social Democratic and Labour Party (SDLP) criticized the proposal, describing it as "a glorified tip jar, unlikely to produce one affordable home."
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