Water system shortfalls could cost economy almost £11bn

A new study suggests that failure to invest in Northern Ireland's water system will cost the local economy almost £11bn in lost growth by 2040.

The work was commissioned by the bodies representing the construction industry, housing associations and the NI Chamber of Commerce.

Persistent underfunding of NI Water has led to a shortfall in wastewater infrastructure, which in turn is limiting house building and other development.

The report again floats the idea of a small household levy to give NI Water a consistent source of funding.

It suggests that an annual average payment of £65 would be enough to make a significant difference.

Stormont's parties are opposed to any household charges for water.

The infrastructure minister has instead brought forward plans for voluntary payments by developers alongside some technical measures to increase capacity.

A spokesperson for the Department for Infrastructure said minister Liz Kimmins will not impose water charging on "hard pressed families in the midst of a cost-of-living crisis".

The assessment of potential lost economic growth has been calculated by the economist Andrew Webb from the consultancy OCO Global.

He has used economic modelling to assess three scenarios:

• A baseline forecast, based on historic growth trends
• A constrained forecast, which reflects the drag placed on development by wastewater capacity limitations
• A success forecast, which represents the economic path that could be achieved if wastewater constraints were progressively removed

The "success forecast" assumes that a levy has been applied to households to fund upgrades to the water system.

Webb says his work does not assume that the funding mechanism is costless.

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 says the modelling shows "a cumulative effect of development being slowed, diluted or displaced over time", resulting in an economic output being £10.9bn smaller than it could be by 2040.

Northern Ireland is the only part of the UK where households do not pay directly for their water.

Instead, NI Water receives a government subsidy which diverts more than £300m annually from the Stormont Executive's budget.

Since its founding, NI Water has been underfunded compared to the amount the independent Utility Regulator says it needs.

Earlier this year the Infrastructure Minister, Liz Kimmins, said she would bring forward a scheme allowing housing developers to pay towards the cost of upgrading wastewater infrastructure in places where they want to build.

The opposition SDLP said the scheme would be "a glorified tip jar, unlikely to produce one affordable home".