As a member of the Committee for Regional Development, I support the Bill with some reluctance. There is no viable alternative to it, but it is not satisfactory. It is unacceptable that, after three years, the Executive have still not resolved how we pay for our water.
We must now pass the Bill to ensure that Northern Ireland Water has funding for the new financial year. However, having passed the Bill, it should not be assumed that Northern Ireland Water will automatically be funded from the block grant for the next three years. The Bill is essential so that Northern Ireland Water can be funded for 2010-11, but the uncertainty cannot be allowed to continue. It is time that the Executive grasped the nettle and resolved the question of how water should be funded in the longer term. Let me make it clear: I am totally opposed to water charges based on property values, which would seem to be the obvious alternative. Such charges are grossly unfair and would fall heavily on the elderly and those on fixed incomes.
However, I recognise that an alternative means to fund water and sewerage services must be found. It cannot be met from the block grant at the expense of other services. The fact is that, under the Barnett formula, there is nothing in the block grant to pay for water. In the rest of the UK, consumers pay charges directly to water companies. There is no call on public finance. Therefore, Northern Ireland Water must be funded either from existing resources, namely the regional rate or the block grant. Indeed, the £300 million payment to Northern Ireland Water is similar to the £367 million of Budget cuts that have been proposed by the FinanceMinister.
Therefore, if the Executive decide to continue funding Northern Ireland Water from the block grant, there must be a reduction in resources that are available for other services, such as housing, education and health. As health comprises half of the total Budget, the burden of paying for water services inevitably falls most heavily on the Health Service, which is already underfunded. I highlighted that issue in my Budget speech in November 2007, when I pointed out that, in the absence of alternative funding for water services, the Health Service’s budget had been reduced, which would, inevitably, lead to cuts in services and significant redundancies. Unfortunately, that prediction has proved to be correct.
In practice, because of demographic trends and the fact that NHS inflation is significantly higher than basic inflation, the increase in the Health Service budget represented, at best, a freeze in overall expenditure. That compared with an increase of 4% in real terms in the English Health Service. The budget was, therefore, unable to meet new demands, such as full implementation of the recommendations of the Bamford report. In order to provide funding for the Water Service, we were required to accept a de facto freeze in the budget and a level of service below that of the rest of the United Kingdom.
In deciding to continue to fund water services from the block grant, the Executive have taken the easy option. However, they ignored the costs of provision of other services. That cannot continue. The issue of water charges is one for the full Executive and not for the Minister for Regional Development, as some people seem to suggest. There must be open debate on the implications of a decision to continue to fund water services from the block grant and the impact that that has on other services.
The public must be made aware of the issue and must be allowed to make a choice between non-payment of water charges and reduction of the provision of health and education. That issue has been raised by a number of people who gave evidence to the Committee for Regional Development. The Executive can no longer avoid the issue of funding for water services. It is fundamental to long-term financial planning. We must consider other forms of taxation, particularly one that is based on ability to pay.
The Executive must revisit the options for funding of local government services. Both the Lyons inquiry and the Burt review into local government in England and Scotland respectively have suggested changes to local government finance that should be considered. The Executive must review all options, particularly income-based alternatives, such as local income tax. That would clearly be fair because it is based on ability to pay. It would also mean that non-taxed householders would contribute to funding. Other options include local sales tax, service tax, land value tax and green taxes, which would help the environment as well as raising revenue, based on the principle that the polluter pays.
All options must be examined. The Assembly should seek to acquire tax-raising powers, so that all increases in public expenditure are not met solely from property tax that is paid by the ratepayer, but from a basket of taxes. Therefore, I ask the Executive to set up a review into the funding of local services and to consider a move from a property-based tax to a mainly income-based tax. That review would also examine other options. If necessary, legislation should be changed to give the Assembly tax-raising powers. It is important that the burden of taxation is spread more evenly and does not continue to fall most heavily on the elderly and on people who are on fixed incomes.
In conclusion, although I support the Bill, it is unsatisfactory that the Assembly has still not resolved the long-term funding of water services. The implementation of the Bill must, inevitably, lead to cuts in other services, particularly health, which currently consumes 50% of the Budget. It is essential that the Executive no longer ignore the issue, but consider alternative methods of funding services, such as water. It should not be based solely on property values. All options must be considered.