Official Report: Minutes of Evidence

The Chairperson (Mr Martin): I welcome Julie Ann, Jim and Damian. Julie Ann is from DFI, Jim is from DFI and Damian is the head of the NI Water shareholder unit in the Department for Infrastructure.

Are members content that this evidence be recorded by Hansard?

The Chairperson (Mr Martin): I invite the officials to give us a briefing, after which they might get some questions. It looks like you are in the hot seat today, Julie Ann.

Ms Julie Ann Dutton (Department for Infrastructure): I am. Good morning, Chair and members, and thank you for inviting us to the Committee this morning to brief you on the Grants to Water and Sewerage Undertakers Order (Northern Ireland) 2027. I am the head of DFI's water legislation branch. I am joined by Damian Curran, head of the shareholder unit, and Jim McComish, who is also from the water legislation branch.

The proposal that is set out in the SL1 extends the period during which the Department may make a subsidy to the water and sewerage undertaker in lieu of domestic water charges for a further period of five years until 31 March 2032. You will be aware that it is current Executive policy that domestic customers should not pay a separate charge for water and sewerage services. Instead, that is currently funded through a subsidy that is paid by DFI to NI Water. At a meeting of the Executive on 16 April 2026, the Minister for Infrastructure secured agreement from Executive colleagues to continue this policy on domestic water charging and to bring forward the relevant legislation to enable it for a further five years. There are several advantages to extending the period by a further five years. It offers the next Executive time to consider and make an informed and planned decision on the future funding of the water industry; it allows time for policy research and development, should the Executive wish to consider a change to the current policy; and, should the next Executive decide to continue the current policy, it allows time to prepare the necessary legislation before the end of the next mandate.

The subsidy to Northern Ireland Water is paid under article 213 of the Water and Sewerage Services (Northern Ireland) Order 2006. That article was most recently amended by the Grants to Water and Sewerage Undertakers Order (Northern Ireland) 2022 and currently has an end date of 31 March 2027. Therefore, a new statutory rule is now required to give effect to the Executive's recent decision to continue the policy on domestic water charging and to bring forward the relevant legislation to extend it for a further five years. The Department has prepared the SL1 and the draft order, which you have received. The order will be subject to the draft affirmative resolution procedure. Therefore, if you are content, the statutory rule will be laid and brought before the Assembly for debate in due course.

I shall provide members with some background on the legislative position. When Northern Ireland Water was established in April 2007, the initial period during which the subsidy could be paid was for three years to 31 March 2010. That end date has been amended on several occasions since then by primary legislation. In 2016, the Water and Sewerage Services Act (Northern Ireland) 2016 provided the power to amend that date by subordinate legislation rather than by primary legislation. At the same time, the Act extended the period by one year, as there would not have been adequate time to make the necessary statutory rule in 2016. Following that, a statutory rule was made in 2017, which amended the end date for payment of the subsidy to Northern Ireland Water to 31 March 2022. A further order in 2022 extended that period again until 31 March 2027. As that date is now approaching, it is necessary to make a further piece of legislation to continue to implement the current policy for a further five years, as agreed by the Executive.

We are happy to take any questions you may have regarding the SL1.

The Chairperson (Mr Martin): Thank you very much, Julie, and thanks for coming along to the Committee. I suspect that this will not be as fulsome as other sessions in which you have provided evidence to the Committee. I have some basic questions, and then I will open it up to members. Essentially, we are talking about a subsidy that the Executive — I suppose, DFI — pay to Northern Ireland Water to make sure that we get clean water in our taps and are able to flush toilets. It really is a subsidy that goes to Northern Ireland Water to allow it to do the job that it has to do. Is that fair enough?

Ms Dutton: Yes.

The Chairperson (Mr Martin): You mentioned the history of the current arrangement. Back in 2006, it was put in place because domestic water charges were not introduced and we needed a route map to fund Northern Ireland Water. Is that reasonable enough?

Ms Dutton: Yes.

The Chairperson (Mr Martin): The only other question that I have relates to the discrepancy between the price controls (PCs) and what Northern Ireland Water gets and would it would like. I think that PC21 was £2·4 billion when it was eventually revised up. We are about to go into PC28. Do you accept that that is below the level of funding that the Department can provide Northern Ireland Water with at this point? I did not think that that was a complicated question, Damian, but there you go. What do you think?

Mr Damian Curran (Department for Infrastructure): It is not a complicated question, Chair. Yes, the level of funding that the Department can provide is not up to the level recommended by the Utility Regulator, at least in PC 21. PC 28 is subject to both Northern Ireland Water's business plan, which is yet to be submitted, and the Utility Regulator's determination of that. The funding level and revenue level that Northern Ireland Water requires to do what it needs to do for that period will then be determined. Yes, the level of budget that the Department can provide for water and sewerage services in general is subject to a lot of competing priorities across the board, as you are well aware. Northern Ireland Water is effectively a core public service that has to compete for public expenditure alongside every other core public service. As you are aware, the Minister is taking forward her three-pronged approach and trying to work with the Executive to argue for additional funding to try to bridge the gap between what the Department can provide and what the regulator has determined is necessary. That work is ongoing and continuous.

The Chairperson (Mr Martin): Damian, your answer leads me to another question. You mentioned PC 28. Is it your view that PC 28 will widen the funding gap between what the regulator thinks Northern Ireland Water needs and what it gets? Or will it close the gap? I am only asking that because you opened yourself up to it in your initial answer.

Mr Curran: As I also said in my answer, it is yet to be determined. We are at the start of the PC 28 process. Northern Ireland Water has a number of steps to take towards, and obligations to, the regulator in order that it can take that business plan away and come to a determination against it. We are all aware that there are ever more competing demands for water and sewerage services and higher, more stringent levels of compliance. That naturally puts even greater demand on what Northern Ireland Water is obligated to do and, by virtue of that, what the Department is expected to fund. It is a continuing journey, if you like, to try to fulfil the obligations and provide a good, compliant water and sewerage service.

The Chairperson (Mr Martin): I appreciate the three prongs. I do not want to get into that, because the Committee has questioned the level of impact that those prongs are having right here, right now. We are not debating the policy intent of, for example, the sustainable drainage systems (SuDS) Bill, which is a good thing, but it is fair to say that the Committee has some questions about the direct impact that the three prongs can have right here, right now on whether we can build a house in Carryduff or Newry. I do not want to speak for Northern Ireland Water. It is not my job to do that, but it is my job to ask questions. Given the evidence that the Committee has received on the subsidy, which is what is being talked about today, I think that it is fair to say that Northern Ireland Water's view is, "We will be able to do x with y money, but if you give us this, we will be able to do more". I think that that is a pretty fair summary of Northern Ireland Water's position. It would probably say, "We can only do so much with what we are given". I am not making a pejorative comment. I am just stating factually what I think its position is. The challenge really is —. It will provide clean water to our taps, and it will make sure that our toilets flush and that, when we turn on the shower, there is water. Some of the things that PC21 and, I think, PC28 will look at in terms of the quantum of funding that it is going to need to do some of the other things that some people may say are pretty core or important —. I am thinking of Belfast lough and Lough Neagh in particular. Northern Ireland Water, a little bit like Translink recently, is going to say, "We cannot really do that, because you are not funding us to that level". In fact, Translink gave evidence that was more or less what I have just said: "If you give us this level of funding, we will do this, but without increasing that or bringing it up to the level that we feel is necessary, we cannot do other things". Do you accept that view, or do you think that it is wrong?

Mr Curran: Chair, you are absolutely right: Northern Ireland Water can only do what it can do with the level of funding that is provided to it. There will be different scenarios, if you like, in terms of levels of funding plus levels of delivery. Northern Ireland Water's core purpose, for example, is maintaining what it has and providing compliant, safe and clean drinking water and addressing waste water issues. If additional funding becomes available — again, that is one of our Minister's prongs, if you like: arguing that with the Executive —.

The Chairperson (Mr Martin): "British Treasury" is the phrase that she might use.

Mr Curran: If additional funding becomes available, Northern Ireland Water will be able to do more. It is capital infrastructure. Capital infrastructure is definite in terms of what it delivers. It involves products; it is physical. More funding will get you more physical infrastructure. Northern Ireland Water has, of course, briefed the Department on what is required, what is deliverable within the funding envelope and what is deliverable on top of that, should additional funding become available. There are some choices there that the Department and, indeed, the wider Executive could take if they wanted to provide the funding to produce the outputs that we all want.

The Chairperson (Mr Martin): Thank you for your answer, Damian. What I am driving towards is —. Take those three prongs: the voluntary contributions, the SuDS Bill and more money from the British Treasury. I think that that is a pretty fair summary of the Minister's prongs. We have had evidence from DFI officials that, even on a good day, the voluntary contributions will offset fewer than 1% of the problems that we have with waste water infrastructure in the next year. That carries its own consequences for house prices. The SuDS Bill, as I have said, is really good. I have been supportive of it throughout the entire time that the Committee has scrutinised it. We expect it to go to the next stage. However, that is long-game stuff. It may be right, but it is long-game stuff. Unless the magic fairy with her wand suddenly comes out and says, "Here is some massive additional infrastructure capital for Northern Ireland", we are looking at what other options are available and what else can be done, because at the minute there are real-world consequences of not being able to build houses. That has a direct impact — I make this point regularly at Committee so that people can understand it — in that it forces up the price of housing, particularly for young families who want to buy a house. It also means that we cannot build enough social housing. I was having a chat with some students yesterday who asked, "Why are we not building?", and I said, "Well, we cannot, because we do not have the waste water infrastructure". There are real-world consequences to this problem. I am not going to sit here and say, "Here is the solution", because that is for the Minister, and her three prongs are her current solution. I will leave it there. Thank you for your evidence, and thank you for the chat, Damian.

Does anyone else have any questions to ask?

Mr McMurray: My question touches on some of the points that you made, Chair, if that makes sense. I apologise if you have already said this. I had to dive out for something, given the day that is in it. The financial mechanics of this —. It is what it is, and you referred to whether it should be changed in the next mandate. What are the mechanics of change, essentially, to allow for more funding or less funding or to accommodate funding? What are the actual mechanics of that, sorry, so I can get my head around them?

Ms Dutton: Initially, the Executive would have to decide to make a change. Research would then be carried out to decide the best option, and it would then take several years, I imagine, to work through that and see how it could be implemented. After the Executive made a decision to change the policy, it could take three or four years before any change would actually be implemented. That is a guess at the timescale.

Mr McMurray: In a similar vein to what the Chair said, the three-pronged approach — the Executive, the SuDS and —. I cannot remember the third one. Help me out.

The Chairperson (Mr Martin): Funding, voluntary contributions and the SuDS Bill.

Mr McMurray: Voluntary contributions. Thank you, thank you. The mechanics of that —. Those levels of —. Say that the Executive decide to fund it more, or Westminster decides to —. Say the developer contributions —. How are all those levels of funding accommodated? I presume there is a mechanism in there to allow for that change of funding. Is that fair to say?

Mr Curran: It is the three-pronged approach. When it comes to funding, it is quite straightforward. Seeking further funding from the Executive is really just seeking additional public expenditure. It is an additional slice of the cake, if you like, that all public services have to compete for. Developer contributions are additional income or revenue from developers who are trying to deliver more assets and have their developments come alive. The SuDS Bill is more about physical change. For example, there could be savings in relation to the requirement for a greater scale of capital infrastructure if we have more natural drainage solutions to keep storm water out of the system. It will be a combination of public expenditure, revenue and a reduction in the requirement for public expenditure on big capital projects through having better natural solutions.

Ms Ennis: It is fair to recognise that, through the three-pronged approach and other initiatives, the Minister has unlocked more potential for more homes than were originally envisaged under PC21. We have to acknowledge that in the first instance. We are talking about the three-pronged approach, and we need to be more supportive of that. I am not suggesting that anybody is not. I think what we are not saying is that the alternative is putting that additional cost pressure back onto households and families. It is right that the Minister has decided that that is not an approach that she wants to take, and it is welcome and right that the Executive have decided the same. While there are competing pressures across all our public services, not least our waste water infrastructure, we have to do all that we can to support the Minister in her efforts with the British Government, because essentially that is where the blame lies and that is where the funding needs to come from. Putting an additional £400 to £600 onto already hard-pressed households will not undo decades of lack of investment from the British Government. While this is not ideal, it is a very welcome and substantial cost-of-living measure that the Minister and the Executive have taken. I welcome the fact that we are approving it today — I hope — and that we will continue to see that pressure being taken off households, because that is the right thing to do.

The Chairperson (Mr Martin): That was a relatively easy session for you, guys. Thank you very much for coming along. We will probably see you in a couple of weeks. Julie Ann, you are nearly catching up with Alison on her frequent flyer miles.