COMMITTEE OF PUBLIC ACCOUNTS debate - Wednesday, 29 Jan 2003

2001 Annual Report of the Comptroller and Auditor General and Appropriation Accounts: Department of the Environment and Local Government.

Vote 25 : Environment and Local Government.

Chairman

I welcome the delegation this morning. Witnesses should be made aware that they do not enjoy absolute privilege and both members' and witnesses' attention is drawn to the fact that from 2 August 1998, section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act 1997 provides certain rights to persons who are identified in the course of the committee's proceedings. These rights include the right to give evidence, the right to produce or send documents to the committee, the right to appear before the committee either in person or through a representative, the right to make a written or oral submission, the right to request the committee to direct the attendance of witnesses and the production of documents, and the right to cross-examine witnesses.

For the most parts these rights may only be exercised with the consent of the committee. Persons being invited before the committee are made aware of these rights, and any person identified in the course of proceedings who is not present may have to be made aware of these rights and provided with a transcript of the relevant part of the committee's proceedings if the committee considers it appropriate in the interests of justice.

Notwithstanding this provision in legislation, I remind members of the long-standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable. Members are also reminded of the provisions within Standing Order 156 that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister in the Government or the merits of the objectives of such policies. I ask Mr. Niall Callan, Secretary General of the Department of the Environment and Local Government, to introduce his officials.

Mr. Niall Callan

I am accompanied by Ms Maria Graham, principal officer in the housing policy section, Mr. Ian Keating, principal officer, finance section, and Mr. Michael Canny, assistant secretary, who is the head of Dúchas, the heritage division of the Department.

Mr. Stephen O’Neill

I am principal officer in the public expenditure division of the Department of Finance.

Mr. Paddy Howard

I am principal officer of the organisation, management and training division.

Mr. Purcell

The vast bulk of the money provided in Vote 25 was represented by grants to local authorities to carry out national programmes in housing, roads and water and sewerage services. The other large sum in the Vote account was the allocation to the local government fund, from which grants are made to local authorities. This is to supplement revenue received from the collection of motor taxation under arrangements agreed just a few years ago. It largely replaces the old rate support grant, which was made from this Vote.

As the committee is probably aware, my remit does not extend to directly elected local authorities, so I rely on the financial audits carried out by the local government audit service to provide me with assurance that central government moneys transmitted to local authorities are used for the purposes for which they were granted and are properly accounted for. All local government audit reports, including those dealing with value for money issues, are made available to me. My office liaises with the local government audit service on an ongoing basis to establish whether there are any material issues arising from its work relating to central government moneys that would require my attention. On the basis of that liaison and my review of the available audit reports, I did not consider that there was anything of substance for inclusion in my report for 2001.

Similarly, my audit of the administrative expenditure of the Department did not throw up any report-worthy reference. I separately audit the accounts of State-sponsored bodies which operate under the aegis of the Department, such as the Environmental Protection Agency, An Bord Pleanála and the National Safety Council.

Mr. Callan

I have furnished the committee with an opening statement of medium length, which I trust members will have with them. I had thought that might allow me to avoid reading it out; otherwise, I can go into the overview section of the statement fairly quickly.

Chairman

To put it on the record, it might be appropriate to read it. It will not be on the record otherwise.

Mr. Callan

I am pleased to appear for the first time before the new committee in relation to the 2001 account for my Department. The year will rank as the last accounting period in which the Department's traditional span of functions, dealing with housing, roads, local government, planning and urban renewal and water, which had remained substantially unchanged for more than 50 years, were comprehended by this Vote. In mid-2002, following the appointment of a new Government, major changes were made to the Department's functions. Responsibility for national roads and road traffic regulations passed to the new Department of Transport, while the heritage functions of the former Department of Arts, Heritage, Gaeltacht and the Islands, as well as responsibility for nuclear safety and Met Éireann, were assigned to this Department.

The year 2001 was a challenging one for the Department in terms of its core agenda of advancing sustainable development and balanced regional development, co-ordinating and driving the implementation of the major infrastructural programmes and supporting local government and our other agencies, as referred to by the Comptroller and Auditor General. Our capital programme has achieved very visible progress in 2001, in terms, for example, of major improvements of the national road network and the Dublin quality bus corridor network, including, in the most high-profile sense, the completion of the M50 southern cross and the M1 Dunleer-Dundalk routes; meeting the social housing needs of some 11,400 households, including through the direct provision of more than 5,000 local authority houses, the highest output of local authority housing in many years; and advancing the provision of modern water services, with particular emphasis on environmental requirements and deficiencies in water schemes.

In 2001 the Department published its three-year forward statement of strategy as well as a new customer service action plan. We introduced a new and customer-friendly driver theory test and an e-payment system for driving tests. On the legislative front, the Local Government Act 2001 brought a major consolidation and modernisation of local government legislation as well as providing a framework for further reform. Other legislative initiatives set down foundations for the plastic bag and landfill levies now in operation and for the penalty points system for road traffic offences. Planning regulations took forward the reform of the planning system, while preparation of the national spatial strategy and of electronic voting arrangements also intensified. Revised Agenda 21 guidelines, entitled Towards Sustainable Local Communities, were also published by the Department during the year.

My written statement goes into detail on the progress that has been made in different business sectors of the Department, so I will not. However, because of the recent change of Government, we are under an obligation to conclude work shortly on a new statement of strategy for the Department for the period from 2002 to 2005, and we have completed work on this and intend that it be published shortly. A clear priority for this strategy will be to ensure that the new mandate assigned to the Department in June 2002 is discharged successfully. With this in mind, we have been carrying out a review to determine the most appropriate arrangements for performing built and natural heritage functions, which have newly been assigned to us, in their new organisational setting.

A number of key issues have arisen in the review so far. The broadening of the Department's remit to include built and natural heritage functions gives us a more complete environmental mandate. It presents opportunities to formalise links between some of these new heritage functions and the existing activities in the Department's planning and environment divisions, and in local authorities, as well as possibilities for regulatory reform and rationalisation.

At an operational level, important issues arise as to how very extensive front-line activities in the heritage area are to be effectively managed, given that the Department has traditionally been focused on policy formulation. Consideration must also be given to the future involvement of the Office of Public Works in relation to built heritage matters, an operational role signalled in the Taoiseach's statement of 6 June 2002.

The present economic and budgetary climate and the mid-term review of the NDP, which takes place this year, challenge the Department to place a heavy emphasis on achieving value for money. We are assigning particular priority at present to the development of a management information framework for the Department, in addition to supporting a similar initiative which is already well under way at local government level.

We will continue to take counsel from the value for money reports produced by the Office of the Comptroller and Auditor General on issues of concern to the Department. The most recent of these was report No. 41 on planning appeals, published in mid-2002. The Department has already responded to the Comptroller and Auditor General on this report, acknowledging that it raises issues of concern for us in relation to evaluating the effectiveness of the planning appeals system. We have subsequently established a joint working group with An Bord Pleanála to consider desirable improvements in the system in light of the report of the Comptroller and Auditor General. A similar exercise involving local authority representatives is being carried out in co-operation with the county and city managers' association.

The Department continues to hold itself accountable to this committee, the wider political process and our stakeholders through the publication of a wide range of information and reports. We will maintain this policy of openness and transparency while seeking to improve our performance in response to the feedback we receive.

Chairman

Can we have agreement to publish your statement, Mr. Callan?

Mr. Callan

Yes, of course.

Chairman

Is that agreed? Agreed.

Deputy Fleming

I thank Mr. Callan for presenting his report. As we noted, the Comptroller and Auditor General, Mr. Purcell, has not produced a specific report on the Department of the Environment and Local Government this year, but I will pose a number of questions having looked at the accounts. It might be more helpful to those concerned to take it section by section. First, I want to deal with the housing section. I have a couple of questions in that regard and if Mr. Callan has relevant information I would appreciate it. I see on page four of the statement that €143 million was provided for the voluntary housing programme during the course of the year. If I am correct, the process by which the voluntary sector builds those houses - I am talking in particular about value and accountability for the taxpayer, which is part of our remit - is that some go through the local authorities' housing programmes. There is also the EU tendering process, which is open and transparent, involving the approval of tenders.

As I understand it, however, the voluntary housing sector is almost entirely, if not completely, concerned with publicly funded contracts. To my knowledge, there are no similar procedures that these organisations must engage in when going through the public tender process because they are not public bodies, even though they are publicly funded projects. I have a difficulty with that because I do not see why there should be a different procedure. Effectively, once the money is given to a voluntary housing agency it is their private money to do with as they see fit. I would like to hear Mr. Callan's views on that matter.

In relation to the construction of social housing, what is the average cost of a local authority dwelling built directly by the local authority, compared to the average cost of houses built by the voluntary sector, all of which are publicly funded? Is there a substantial difference? If so, is the difference justified? I am not complaining if there is a difference but I would like to know if it is justified.

I compliment the Department on its four-year house building programme. I know from my experience in local authorities that there has been a tremendous increase in such activity by local authorities in recent years, which is very good.

On page five of the document, Mr. Callan mentioned that 1,400 tenant purchase schemes, 1,600 shared ownership schemes, and 272 affordable housing units have been provided under these schemes. I know that county councils are directly involved with these schemes, as well as the urban district councils as they were formerly known. How many different agencies were involved in administering what are essentially 3,300 house purchases through tenant purchase, shared ownership or affordable housing schemes? At a guess, if 50 local authorities were dealing with those - between local authorities, corporations and urban district councils - that is on average 60 dwellings per local authority. Some are quite small, while those in the Dublin area are quite big. From the point of view of achieving an efficient use of taxpayers' money, would it be better if that work was done by a central body? Given that there are so few shared ownership schemes going through some of the local authorities, and the inevitable staff changes from year to year, staff cannot develop a level of expertise as one might find in a financial institution.

Every day, one hears advertisements on the television for 24-hour mortgage approvals, yet there is a tremendous sameness for the customer because the approval mechanism is so widely dispersed between so many local authorities whose staff inevitably change posts over time. Conversely, the Department of the Environment and Local Government worked centrally when it administered the first-time house buyer's grant, which involved thousands of applications nationally. In that case, applicants dealt with a central office which issued their cheques. Would it not be a more efficient use of the Department's resources if social housing schemes were centralised? I realise there might be a kick-up at local level but the customer is not getting an efficient service at present.

I want to deal with water and sewerage schemes later, but my last question on housing concerns the serviced land initiative. What is the take-up on that scheme and is it as effective as expected, given that the Department, the local council and the developer can make a contribution to develop sites for new housing projects? I often hear of these initiatives being announced but I do not see the houses being built two years later because the plans are still somewhere in the system. Perhaps it is the fault of the private sector in some cases. Can Mr. Callan comment on the difference between what plans are announced and their delivery?

I will conclude my questions on housing with that, Chairman, and I will go on to the other issues afterwards. I would like to get a response to those questions. If Mr. Callan does not have the information to hand, I would be happy for a note to be circulated to the committee subsequently.

Mr. Callan

I thank the Deputy for those clearly formulated questions. The first concerned the degree of transparency in terms of procurement operated by voluntary housing bodies. By way of a general preface to that question, we are committed to the policy of increasing the contribution of the voluntary sector and encouraging the sector to become more professional. Ireland is behind the performance of other European countries in terms of the participation of voluntary bodies in meeting social housing needs. We feel this is a proper area of growth for Irish housing policy and we have been trying various initiatives to enhance the role of the voluntary sector.

In response to those policies, as Deputies will be well aware, a number of very skilled professional voluntary organisations have come into the Irish housing market in recent years, to the benefit of local authorities and the clientele for affordable housing generally.

Traditionally, the Department favoured voluntary housing for another reason which was that we had an instinct, at least - although it might not be possible to quantify it exactly - that voluntary housing was better value and, at the end of the day, a product more cheaply procured than traditional local authority housing which was beset by greater bureaucracy. That idea is no longer as valid. As the voluntary sector has become professional, our sense is that on pure cost grounds, there is now little to choose between the operational cost of producing a unit of voluntary housing and the cost of producing a traditional local authority house. Nonetheless, there are still benefits accruing from voluntary housing, such as much better and more flexible management of groups of houses and so on after they are built, which well justifies our support of voluntary housing.

In relation to the net question about public procurement and openness, we have guidelines, of which I do not have copy with me, for local authorities and, through them, for the voluntary bodies which benefit from our grant assistance which stress that the procurement of voluntary schemes should be competitive. We set down that principle.

Our input into voluntary housing is not 100%; it is a subsidy. We do not provide the absolute 100% cost of the house. A measure of operational flexibility properly rests with the bodies which do the work for us. We have signalled our general requirement that procurement should be competitive and if this is something we need to tighten up, we will address that. If difficulties or, worse again, abuses of any kind come to light, that would concern us.

In a sense, I have already addressed the Deputy's second question about the relative costs of local authority and voluntary housing. Taking 2002 figures, we estimate that the all-in cost of a unit of local authority housing country-wide is of the order of £137,500 while outside Dublin, it would be somewhat less - about £123,000. Unfortunately, this brief straddles the euro changeover. In Dublin, the average cost of a local authority house is of the order of £168,000. I do not have the mental agility at this point to convert upwards into euro.

As regards organisational efficiency, I think potentially up to 90 or so local authorities, including all the smaller urban councils, could be involved in the operations the Deputy mentioned, including tenant purchase and so forth. The Deputy understandably queried whether greater efficiencies might not be achieved by centralising some of these functions. This debate has been on the agenda for some time. A few years ago, the NESF nailed its colours fairly clearly to the mast with a recommendation that a national housing authority be established. I am precluded from becoming deeply involved in policy decisions which are proper to the Oireachtas and the Government but I can set out some of the background, in the spirit of helpfulness.

A number of agencies operate at central level in the housing arena - for example, the Housing Finance Agency, the National Building Agency and the housing unit which is institutionalised within the IPA and which advises local authorities on housing management issues. In terms of the system we operate now, we have been reasonably heedful of the need for centralised inputs in addition to the overall controls and supports operated from the Department itself for local authority housing.

I do not wish to enter the political fray on this, but the counter argument is that there are many elements of housing administrations which are usefully operated at local level and with a measure of local discretion. There is no huge ideological divide here. In their wisdom, the Government and the Legislature, in looking at the functions exercised by my Department about ten years ago, set up a National Roads Authority to better manage the national roads programme. Purely from an organisational point of view, that initiative has not been unsuccessful. Dealing with housing needs should not be directly compared with the roll out of a national roads network. There are essentially local issues and aspect to the provision of housing services.

A consultative body, known as the Housing Forum was set up under the PPF. It has been a sounding board for housing policy issues for some years. In response to the NESF recommendation for a national housing authority, the Housing Forum took up a counter position. It felt that a fully fledged national housing authority could draw too much from the local sphere and over-bureaucratise, if you like, the provision of housing. However, these are debating points from me and are matters proper for decision by legislators.

As regards the serviced land initiative, work is going ahead reasonably successfully. Our latest position report reveals that nearly 200,000 sites are likely to be provided under the initiative while work has been completed on more than 50,000 sites. At times the initiative and the targets have not been met with the timeliness for which we would have hoped but, on balance, the initiative is a good one. It is one of the instruments contributing to a healthy situation where we have a reserve of approximately six years' housing land. That is not true of every county or in every pocket of the country but if one looks at the situation in aggregate, we have a supply of six years' housing land available for housing programmes.

Deputy Fleming

I accept everything Mr.Callan said. Going back to the tendering process for publicly funded contracts for the social housing sector, Mr. Callan confirmed what I believe to be the case. Guidelines which aspire to all the right things are issued but there is no obligation on those receiving the €140 million to implement the guidelines. Guidelines are not good enough when talking about €140 million of taxpayers' money. I would like those procedures to be tightened up because, ultimately, those organisations are free to pick and choose contractors. They can choose who they wish to invite to make a tender in the first place. Because they receive Government funding and taxpayers' money, those guidelines should be given greater force. They should not just be guidelines.

Other members can discuss the road section and I will conclude by referring to the environment section of Mr. Callan's report. Under the water and sewerage programme, the importance of water quality in rural schemes was mentioned. However, the list of projects to be financed is substantially urban-based. Sufficient investment is not being made in rural water supplies. Perhaps Mr. Callan can supply details regarding the number of group water and sewerage schemes in 2001 and the amount allocated to each scheme. I am a rural member and I am aware that very little funding is provided for group sewerage schemes in rural areas. Obtaining sewerage services is the greatest difficulty people face when they try to build in rural areas because the use of septic tanks is criticised. The essential problem is lack of Exchequer funding for rural group sewerage schemes and that has resulted in the use of an excessive number of septic tanks.

Waste management plans are also mentioned in the report. There are between eight and 11 such plans. When were they passed? The previous Oireachtas passed legislation to deal with local authorities who had not introduced such plans by providing the county manager with the authority to draft a plan. Have annual reports been submitted regarding the implementation of each plan to the Department?

I refer to local government finance. Has every local authority submitted audited accounts for 2001 to Mr. Callan? If not, why not?

VECs are subsidiaries of local authorities. Perhaps this is outside Mr. Callan's brief. Similar to housing grants, myriad vocational education committees and local authorities approve third level grants, yet the Central Applications Office, on its own, can administer all third level places. There must be excessive cost involved in administrating the grant scheme through more than 100 organisations. The CAO, which deals with a similar level of work, is efficient. I query this in terms of improving service to the client and not as a cost saving.

Chairman

The vocational education committees come under the remit of the Department and Education and Science.

Deputy Fleming

I refer to third level grants administered by local authorities for universities. The vocational education committees process grants for institutes of technology. As the Chairman will know because he is a local authority member, there is a heading for third level grants in the annual estimates.

Mr. Callan

I identified five broad headings for the Deputy's questions. With regard to the balance between predominantly urban waste water improvement schemes and rural schemes, I like to think we support both sectors quite well. Given our obligations under the EU directive on waste water treatment, we have had to front load investment in projects in major urban areas. Some schemes are extremely expensive. Work is being completed on major coastal discharges in towns such as Dundalk, Drogheda, Dublin and Limerick while a project is under way in Waterford. These are serious, environmentally prioritised schemes and we are bound to invest in them under agreements made at EU level in the early 1990s. We must bear in mind that much of the funding for water and sewerage programmes over the past 30 years has come from EU sources and it is tied to such priorities.

However, in a sense we have reached the peak of investment in those major facilities and I estimate going forward they will be less of a call on the programme. The major schemes are completed or virtually complete and, therefore, the balance of the programme will inevitably change. At the same time, we have prioritised smaller investments in rural water programmes in a major way over the past five years. The group scheme system that has sustained us well since the 1960s was based on a great deal of self-help, co-operative effort and practical engineering.

In light of updated environmental standards and technologies, the programme is in need of considerable improvement and we have restructured the rural water programme. Approximately one third of our capital resources goes into rural schemes and that balance may well increase because of the factor I mentioned earlier. We expended £22 million on capital grants for group water schemes in 2001 and £5 million on the takeover of group schemes. I do not have precise figures for group sewerage schemes but I will supply them to the Deputy in a note.

All the waste management plans have been adopted following the enactment of the legislation in late 2001. I am not absolutely sure about the submission of the first annual reports but there is active dialogue between the Department and local authorities regarding action on foot of the plans.

I will give the Deputy a note on the submission of the audited accounts as I do not have detailed information. A substantial number have been submitted at this stage. I spoke to the director of audits the other day but there may be one or two stragglers and that is a matter of concern to us.

As the Chairman intimated, the administration of third level grants is a delegation of responsibility to local authorities by the Department of Education and Science. Obviously my Department is pleased that local authorities are able to offer agency services efficiently and conveniently to central bodies. In principle, we favour this concept and have supported it through the encouragement of one-stop shop initiatives at local authority level and similar measures. Ultimately, it is a matter for the Department concerned to decide, in terms of the customer friendly and effective delivery of the service, whether to continue the devolution of its services to local authorities in the way that operates at present for third level grants.

Chairman

Almost €3 million less was spent on waste management than was anticipated and budgeted for. The difficulty appears to be in finalising local and regional waste management plans. What does Mr. Callan see happening there going forward?

Mr. Callan

We have had underspend for some years on waste management plans. That has been largely due to the delay in finalising strategies. However, following the enactment of legislation that allowed that task to be completed by early 2002, we have considerable ambitions for ratcheting up the spend in the present year. It is necessary and we have already provisionally allocated a large tranche of grants for recycling purposes but it is subject to European Union approval in respect of its compliance with state aid regulations. We are awaiting that, but as soon as that is released, there will be a large increase in the spend. This is financed by the new environment fund.

Chairman

How effective is the role of Repak in the development of recycling?

Mr. Callan

Repak and the Department are partners. We have many discussions from time to time. We sometimes see things differently as has to be the case because we operate in the role of regulator whereas Repak is the organiser and convenor of a voluntary agreement. Therefore, it is not appropriate for my Department to give an unqualified endorsement to a voluntary operation.

However, it is the case, and I want to say this in a spirit of generosity to Repak, that it has been able to deliver and exceed the delivery of our 25% recycling target for packaging waste by 2000. That target looked quite difficult in terms of delivery some years back but it has been delivered with the commercial know-how of Repak and its members.

We are placing considerable trust and faith as we go forward in the development of other so-called producer responsibility initiatives similar to Repak in different sectors. Such an initiative is already in operation in relation to plastics. One is being developed for construction and demolition waste and another with the motor trade, the Society of the Irish Motor Industry and the dismantlers' representative body in relation to end-of-life vehicles. We are working with representatives of the white goods industry in relation to end-of-life goods of that nature, and even with the newspaper industry in relation to newsprint. We have hopes that good voluntary arrangements similar to Repak will emerge quite soon in these areas as well.

Chairman

How does Mr. Callan expect the €60 million in income from the levy on plastic bags to be spent? This was supposed to be ringfenced.

Mr. Callan

Its authorised application is set out in law in the Waste Management (Amendment) Act and it must be applied to a range of environmental purposes set out in that Act. I do not want to sound too rigid about that. The income supports a scheme of recycling grants. It may be deployed in support of environmental awareness programmes, stricter and more active environmental enforcement and for other environmental purposes, including infrastructural purposes.

Deputy Connaughton

I have a number of queries I would like to put to Mr. Callan and Mr. Canny from Dúchas. This question is directed to Mr. Callan. Is it true to say that the new figures for the cost of landfill and incineration projects will be about 50% higher than was forecast three years ago? If that is so, will money be available for this huge investment programme? As Mr.Callan will be aware, there has been a huge increase in the cost of materials, labour and so on.

Why is it that parliamentary questions to the Minister for the Environment and Local Government concerning landfill sites are not answered for some unknown reason? It appears to be someone else's responsibility. I am unable to have some of my questions answered on matters relating to landfill, incineration and so on. Will Mr. Callan indicate why that should be so?

In so far as water supplies are concerned, especially group water schemes in rural areas, I can see that one of the reasons funding would be made available would be to upgrade existing sources that are not up to standard. That is reasonable and anyone can accept that. Why is it at this stage that local authorities are not in a position to fund water supplies to new households that do not have a water supply? Surely there is an irony in the fact that no grant aid is available for group water schemes to allow communities to provide a good water source for people who do not have a water supply other than a domestic tank. I understand that local authorities have asked for extra funding this year to allow them fulfil that need.

It may not be well known that huge numbers of households do not have running water supplies. I do not refer to people who have existing water supplies that are either polluted or of bad quality but to houses that do not have any water supply. We do not have time to list all the areas but I can certainly give examples in my county of Galway. That is not good enough in this day and age.

This question may not specifically relate to 2001. I read in press reports recently that it appears the electronic voting machines used in the Nice treaty referendum were not as efficient as one might have hoped. Will they be the same machines that will be used at the next local government and European Parliament elections or will there have to be new machines or a change in the design of the machines? What is the cost of the machinery which has been used so far? It will come as a great shock to people if machines which should have been tested are in error to some degree.

Chairman

Mr. Callan may want to answer those questions first and then we can get back to Deputy Connaughton.

Mr. Callan

On the cost of waste management infrastructure, the national development plan has an estimate of required cost of the order of €825 million. We accept at this stage that that estimate will need to be exceeded in relation to the quantum of infrastructure envisaged by the national development plan. I emphasise, however, that the vast bulk of the funding embraced in the €825 million or any revised or increased figure will be for the private sector to meet. In general we intend that the bulk of new waste management infrastructure be provided by the private sector and costs recovered commercially by them on the basis of charges in line with "the polluter pays" principle.

In relation to answering parliamentary questions on waste management issues, landfill, incineration and so on, we answer questions on these areas frequently and on an ongoing basis. I do not have the specifics and we will not debate the specifics of the difficulties the Deputy may have encountered but at the policy level we are conscious of our responsibility to explain policy issues in these areas to Deputies and we do so frequently.

Regarding water grants for individual houses, we have a scheme of grants for improvement of individual supplies and these are available to houses which are not connected to either a public or a group scheme or which are otherwise upgrading their water supply. We paid some €4 million in such grants in 2001. Equally, the group schemes system serves to pay costs based on individual house needs as part of our contribution to that system and we paid out approximately €22 million in 2001 in that regard. I will look into the Deputy's query more fully and perhaps write to him through the committee on this issue. Obviously he has something in mind that is not comprehended by either available source of grant assistance.

To answer the electronic voting question, the machines which have been used up to now for electronic voting purposes will not be used again in the same format in any election. We have a commitment to roll out electronic voting to both the European and local elections in 2004. With that in mind we will need almost 7,000 voting machines at a total cost of €37 million plus VAT. The initial deployment of electronic voting machines was clearly stated as being on a pilot basis and we have learnt from the experience of electronic voting on the two occasions during which it has been used. We will modify and re-equip the thousand or so voting machines which have already been in operation so that they will be virtually new machines. They will form part of the complement of 7,000 machines needed for the countrywide elections.

The Department does not accept that the machines were in any way in error. They were tested extensively and comparatively tested against manual voting exercises and they were found in all instances to produce much more accurate results than the manual voting system. The controversy that arose two months ago concerned the protection of the machines from malicious external interference; it related to proofing the machines against those who might wish to disrupt or interfere, fraudulently or otherwise, with machines in or around voting day itself. That issue will be reviewed in the context of testing the 7,000 new machines but we do not consider that the concerns raised by the report of the time, which was a subsidiary report and not the main testing report, were a cause of worry regarding the operation of the machines in the general election.

Deputy Connaughton

I forgot to ask what the machines cost to date. From the ordinary man's perspective it is difficult to see why, if the machines operated without errors, the same machines could not be used in future.

Mr. Callan

The machines to date cost €5.6 million plus VAT. It is not a question of errors; we want to make them more user-friendly. There were concerns about visibility and the screen had the capacity to take 28 candidate names. In light of testing it is now felt that that is perhaps too much and that we need to make the machines more user-friendly. There are other improvements involved also but it is not a question of the admission of error. It is a matter of improving the accessibility and user-friendliness of the machines to the voting public they serve.

Deputy Connaughton

I live in the middle of the area of the country now designated SAC and NHA. Property owners feel Dúchas has a heavy hand. First, it was understood that no more areas would be included after the 1994-95 tranche covered by the habitat directive but now almost as much acreage has been included this year as there was then. From where did the pressure for that come?

Also, a facility was given to private bog owners from 1994 onwards to cut turf for domestic purposes for the following ten years. Will that apply to the new area? Is it the intention of Dúchas to purchase that bog and land and, if so, will the price per hectare increase in line with current market demands?

Mr. Callan

With the permission of the Chairman, I will hand over to my colleague, Mr. Canny, who will give a detailed response to DeputyConnaughton's question.

How many polling booths are currently in the State?

Mr. Callan

I would have to check that figure because it is not in my brief.

Deputy Boyle

I have a series of questions but may I first ask a general question? The Minister recently said there will be a cost to the Exchequer of €1.2 billion a year if the country exceeds its current level of commitment to the Kyoto protocol. How has that figure been arrived at?

In regard to the report and accounts before us, I wish to ask a series of questions on housing. In his earlier reply, Mr. Callan indicated that the cost of producing a house in Dublin was £168,000 and the cost outside of Dublin was £123,000, a difference of £47,000 or €56,000 per unit. I presume the difference in cost is largely to do with land acquisition. As a result, the average cost per unit in Dublin at £168,000 would be €215,000, which indicates that to provide a single unit of social or local authority housing in Dublin is more than the average house price of acquiring such units in the country in general. To what extent is the provision of such housing units built on a value for money principle in terms of their future maintenance? Many of us who have operated in the local government system have seen considerable annual expenditure at that level for maintaining buildings that were not properly constructed in the first instance. How does the Department monitor that type of value for money in its housing programme in general? What does the Department do to ensure low cost maintenance for house dwellers? Anecdotal and personal experience indicates that people who live in social and local authority housing pay a greater proportion of their income in terms of heat, light and general maintenance which is not taken care of by local authorities.

Does the Department keep a register of land owned by local authorities throughout the country? If there is a problem in terms of land acquisition and the unit price for houses, are there regulations to discourage local authorities from getting rid of existing land, or the circumstances in which they can get rid of the land? I ask this because in some instances land has been got rid of in circumstances that may not be considered value for money.

Is there an estimate of what it will cost the Government to bring group water and sewerage schemes up to the standard required by the group water directive and the urban waste water directive?

Does the Department keep a register of the level of indebtedness of each local authority, the degree to which loans are outstanding and the cost of servicing such loans? Such information would indicate the extent to which the outgoings of each local authority go on servicing such loans to the detriment of other services.

Mr. Callan

The question of fines applicable to Ireland in the event of non-compliance with or exceeding of our limits under the Kyoto Protocol is complex and the Minister's statement has been somewhat misunderstood. I would need more time to consult to be sure of all the technical details but it is my understanding that while considerable leverage has been built into the Kyoto Protocol in terms of compliance, and properly so, a quantified fine of that kind is unlikely to arise in the short-term, or at least until 2012 or so, even in the hypothetical situation involved. There is a subsidiary and related issue, which is that the EU is currently concluding an emissions trading directive. There are penalties or quasi-penalties built into that and it will have application from about 2005 for a period of some years. Rather than swap figures with the Deputy, I would prefer to give him a note on exactly how these various mechanisms might apply in the hypothetical situation of non-compliance by Ireland with the protocol and I will see to that.

Without going into the question of comparing the cost of local authority houses in Dublin and elsewhere in fine detail, one assumes that factors such as different contractor prices in Dublin and other parts of the country and the possibility of more and cheaper greenfield development outside Dublin than in a relatively built-up area, contribute to the differences.

In approving local authority housing proposals, the Department pays particular attention to the question of future maintenance and to factoring in the value of a low-maintenance or maintenance free period in the future. For older houses, there is a scheme for area regeneration and remedial works, which tries to extend the life and improve the environment of these houses. All houses, including local authority houses, must comply with minimum building regulations. It is, obviously, a firm principle with the Department that local authority houses show this compliance.

About £430 million has been invested by local authorities in land banks to meet the needs of the social housing programme. To the best of my knowledge, we do not have a comprehensive register of land owned by local authorities although this will soon become available to everybody by virtue of the new accounting and financial management system which is being rolled out in local authorities and which will require them, on the accrual accounting principle, to operate an asset register. A survey of available public lands for housing, including local authority lands, is being conducted under the auspices of the Office of Public Works but is not yet complete. That will also give us more information.

We have budgeted to spend €644 million within the NDP period, that is up to 2006, on measures to improve rural water supplies. Approximately 70% of this will be targeted on the BMW region, where group water quality problems are most acute. This gives a medium-term estimate of what we feel is necessary to bring group water schemes up to standard. It may not be the end of all investment in these schemes because there will always be a need to visit earlier schemes which are falling out of compliance and which may need re-investment. However, that is our medium term investment at this stage.

My understanding, subject to checking, is that information regarding the indebtedness of local authorities is set out in the volume published by the Department, Returns of Local Taxation. This is a collation of returns from local authorities which we publish annually. It is, admittedly, a little in arrears but I believe it contains balance sheets and figures of the kind mentioned by the Deputy. I will research that and let the Deputy have the latest data.

Deputy Boyle

In relation to comparisons of provisions of housing units, does the Department have a measure of how similar housing is being provided in the private sector? There are no direct local authority build units and very often the same contractor will produce similar houses for both sectors which can be costed on the private market. Is there a measurement which the Department uses because it seems the cost of providing local authority houses might be higher than it would otherwise be?

Mr. Callan

There is, of course, competitive tendering for all local authority housing schemes. Not all local authority houses are procured as direct builds. Authorities also buy houses, in turnkey operations, which are built in the private sector and therefore benefit from whatever the going rate is in the marketplace. It is a mixed situation. Of course we keep an eye on these comparisons all the time.

We are very focused on unit costs in acting as controller of the local authority housing programme at national level and we constantly remind individual local authorities if they are out of line with norms and averages or performance elsewhere. It is our business to maximise output from the overall allocation assigned to the Department's Vote and we do that through many different administrative processes, including architectural inspection but also administrative comparisons of the kind I have mentioned.

Deputy Boyle

May I ask Mr. Canny a question?

Chairman

Mr. Callan is the accounting officer.

Deputy Boyle

It is in relation to Dúchas and a different perspective from that of my colleague, Deputy Connaughton I wish to ask about special areas of conservation that have been already designated and subsequent redesignations that have affected the value of land adjacent to them. I know the process is at an early stage and it depends on development plans that are coming under the new system, under the new Planning Act. To what extent does Dúchas involve itself in exercises of redesignating the boundaries of already designated special areas of conservation? I can cite one example in Inchadoney Island in County Cork and the fact that Dúchas has been prepared to talk with a company about possible redesignation of other areas that are in existence. I am interested in hearing an outline of the practice of that activity within Dúchas.

Mr. Callan

With your permission, Chairman, I will pass over to Michael Canny for a more detailed explanation. I simply say by way of broad comment that at this stage about 14% of the Irish land mass is under SAC designations and we are proposing to add a very small increment to that as I explained to Deputy Connaughton. Obviously, given the extent of those designations, it is only reasonable that the Minister responsible would hold himself open to some reasonable adjustment from time to time on the margins of the boundaries of designations which were made once off some years ago. That process is a proper and defensible one and is carried out by Dúchas.

On the issue on which Deputy Boyle touched marginally, about compensation in relation to designations made for nature conservation purposes, there is in existence a scheme of compensation for restrictions to farming practices and restrictions to turf cutting where SAC designations require these things. We operate a voluntary scheme which is funded from the Department's Vote to compensate farmers and people who have rights in relation to turf cutting, for restriction of those rights.

In the context of the Planning and Development Act 2000, the legislature has decided that designation for nature conservation purposes is non-compensatory in relation to any claim for diminished value of the land, down-zoning, so to speak. We do not entertain compensation claims for land that has lost its development potential by virtue of designation. The legislature has examined that issue and has expressly included it in the Schedule under the Planning Acts as a non-compensatory matter. Michael Canny can add more in relation to practice on redesignations.

Mr. Canny

In relation to boundary adjustments, we operate both a formal and an informal appeals or objections system where if a land owner feels that the land does not qualify for designation we will look at the case again. We have an informal system which deals with most of the cases. We go on to the land with the land owner and we either agree or disagree. We then have a more formal system where the land owner makes a case to an appeals advisory committee which makes a recommendation to the Minister. All appeals are dealt with on the basis of the scientific application of annexe three of the directive and would be based on the existence or non-existence of the habitats.

There are a number of cases where we designated the nearest physical features, such as a road boundary or something similar. There are lots of genuine cases where a particular vegetation or a community of vegetation or plants would come half way up the field and in that case it would be black and white and we would then agree to adjust the boundary. That is the main context in which adjustments would take place. Otherwise a new survey would give us new information which we would use.

As the Secretary General said, there is no compensation for potential loss or loss of potential. There is compensation for actual losses incurred and that is in the regulations and that was in the agreement with the main farming organisations.

Deputy McGuinness

On a personal note, I declare that I have a brother who works in Dúchas. I am not saying that anything I say here today would be of any interest to him but given the times we live in, it is important that these declarations are made now rather than later.

Is BLG - better local government - giving value for money? It was mentioned that it enhances the role of the public representative. I do not see that happening but I know that it is a huge cost in each county area. In relation to that cost and the services now being delivered in a different way, are we getting value for money?

There is a line on page 25 about the Vote for tribunals. In 1997, the expenditure was £4.6 million and in 2001, it was a little more than £14 million. What is the expected spend under that heading for 2003? Has the recent question regarding costs at that tribunal significantly increased the cost to the State?

I presume the audited reports from local authorities are submitted to you. When a local authority is the overseer, if you like, for the provision of roads infrastructure, where the National Roads Authority provides the funding, but is being managed by the local authority, what happens if there is a serious overspend? Is that reported in the auditor's report? I am aware of one piece of infrastructure in Kilkenny which was costed at €13 million and the present estimated overspend on that project is €15 million. How does that happen and how does the Department then react to that type of huge overspend?

In relation to housing, the local authority is merely the conduit for drawing money from the Housing Finance Agency and giving it out as loans. Those loans are repaid to the council and presumably the council is then expected to return that money to the Housing Finance Agency. Where the council does not return the money to the Housing Finance Agency and allows that money to go into the day-to-day running of the council and where an amount of maybe €9 million is absorbed by that action, does that show up in the auditors report? I am giving a specific incidence where it happened in Kilkenny and where we now have to fund a loan of €9 million, thereby taking money from our day to day activities to repay that loan and not delivering the level of services that perhaps we could deliver if that loan did not exist and proper procedure was acknowledged in the first place. I want to know what happens there and whether that shows up in Mr. Callan's report. Does he in turn go back to the local authority and either sanction someone, call someone aside or seek an explanation?

The interview process in local authorities gives rise to a question of value for money. Is there not a better and more transparent way in the eyes of the public to conduct that interview process? Because of the enormous cost involved and because highly paid civil servants are away from their desks on a daily basis, this gives rise to the usual complaint from the general public that when they seek an official he is away either on a course or on an interview board. There must be a better way. A commercial company in the open market could not conduct its business and its interview process the way the local authorities conduct them. Is there a way to estimate the cost involved? Is there a more transparent way to do it? How many people from outside apply for these jobs? I understand it is now open for anybody to apply, but yet it seems public officials are interviewing public officials for positions within the local authority.

Since my election in 1997, I have placed many questions to Dúchas and have received less than accurate information from it in relation to many heritage sites, not just in Kilkenny, but all over the country. Some of the questions answered related to spend, procurement procedures, tendering procedures, etc. I thought I was the only one who felt the answers were less than accurate until I read the PricewaterhouseCoopers report, dated July 1998. In the context of the finance and value for money, what action has been taken on foot of that report, which is quite damning in terms of the procedures within Dúchas? That report states:

Not only is the external world to which the Department relates confused by the current arrangements, but staff within the organisation often find themselves confounded by the lack of any consistent logic in the current regime.

Again relating to finance, page 8 of that report states:

Poor process design and inappropriate long reporting hierarchies with too many grades all lead to overlap, duplication, lack of flexibility in resource deployment and wasteful effort.

Again in terms of finance, page 10 states:

The financial systems support requirements on the heritage side fall considerably short of what is required. This area needs to be looked at in a separate review, such is the shortfall in that particular department.

In relation to that, what qualifications, in terms of proper financial management, do the people within that section have?

In terms of staff page 37 of the report states:

Well-motivated staff are frustrated by structures, grades and hierarchies, which actively impede rather than support their ability to do a good job.

The Office of Public Works gave each employee a handbook for industrial employees. That handbook refers to subsistence allowances and payments. This does not relate to any relative of mine that I have asked to do this, but a number of employees around the country have indicated to me that they are not being paid what is indicated on page 99 of that booklet. Nor have they been given a Dúchas booklet outlining their rights as employees to subsistence and meal allowances and how those amounts are arrived at.

Will this deliver value for money? Certainly the Department would not have a complacent view that simply by sanctioning a number of tranches of additional staff and by, as it were, wheeling out a well publicised programme of reforms that will do the business of itself. The test is in the implementation. It is a concern to us that the commitment of extra resources, which has undoubtedly been made to local authorities through the better local government initiative - extra management resources in particular - must result in sharper and better performance.

As I say, the jury is out. I would not be complacent enough to claim that that objective is achieved yet. It is my view in common with the various Ministers who were involved in the implementation of this initiative, that the analysis that local authority management prior to BLG was inordinately weak, was a correct one. For bodies administering programmes on the scale that local authorities are involved in now, such as the national roads programme, the suite of housing programmes that we talked about, water programmes, dealing with complex environmental issues, it meant there was a need for a stronger management structure than was operating in local authorities at the time in question. Efforts were made, with or without BLG, incidentally, and the pressure would have been there to strengthen management in respect of some of these programmes. It so happens that at a time when major capital programmes were ramping up from the late 1990s through to the present day, we also had under way the better local government initiative. However, with or without the better local government initiative, there would have been pressure for a more professional management of some of these more sophisticated programmes that were starting to challenge local authorities.

I would also say - and this ties into another point made by the Deputy - that it is right to bear in mind that virtually all these additional posts are not a closed shop in terms of access. In other words they are not confined to people already serving in local government but are open to all comers and can only be filled by open competition. Perhaps, as I strayed into that point, I will finish it. An issue was raised on interview processes which have to be carried out for middle management and senior posts in local government. Some years ago, more of those jobs were filled through the Local Appointments Commission based in Dublin. It was considered more efficient at that time to devolve the filling of these posts from the Local Appointments Commission down to local government level. The phenomenon to which Deputy McGuinness referred may stem, in large measure, from that decision. I would imagine that, in cost terms, the economies as between filling these posts through the LAC process or as they are currently filled, would be fairly marginal.

The method of filling these posts has, in some cases at least, been negotiated with the trade unions concerned. In all cases, it involves bringing in external people in order to preserve transparency and integrity. It undoubtedly involves costs and dislocation of officials from their ordinary day jobs to participate in this process. To a greater or lesser extent, these are burdens affecting the public service, whether in health boards, local government or the civil service in the times in which we find ourselves. We do not spurn the use of private consultants, on occasion, but this is also an expensive business. I have direct experience of engaging private consultants and, while they can do a very professional job, they have to cover their costs. The service does not come cheaply. I will certainly reflect on the points Deputy McGuinness has made in relation to the interview process and the burden it places on administrators and managers in local government, with a view to seeing whether the process can be somewhat sharpened.

On the cost of the tribunal which my Department is concerned with financing, namely the Flood Tribunal, the estimated spend for 2003 is €13 million. That is a high figure, but it anticipates that, in the present year, the tribunal will begin awarding costs arising from some of its earlier hearings to certain participants. On the question of overspending arising on major capital projects - the Deputy gave an example of——

In principle, it is not open to local authorities to engage in facile accounting. If the matter was as facile as was described by the Deputy, it would be of major concern to the Department. I will certainly look at it and give the committee a note.

I thank Mr. Callan and his officials for attending this meeting. I also thank the officials from the Department of Finance for their attendance, as well as the Comptroller and Auditor General, Mr. Purcell, and his team. Next week, the committee will examine accounts of the Office of the Revenue Commissioners. This will involve input from officials from the Departments of Enterprise, Trade and Employment and Finance, as well as Revenue itself.

We will not note the Vote of the Department of the Environment and Local Government at this stage as certain matters, such as correspondence, are still outstanding. I know Deputy McGuinness has queries about Dúchas and there are some questions I would like to ask the next time we meet officials from the Department.

The witnesses withdrew.

The committee adjourned at 2 p.m.