I move:
That a sum not exceeding £762,409,000 be granted to defray the charge which will come in course of payment during the year ending on the 31st day of December 1986 for the salaries and expenses of the Office of the Minister for the Environment, including grants in lieu of rates on agricultural land and other grants to Local Authorities, grants and other expenses in connection with housing and miscellaneous schemes, subsidies and grants including certain grants-in-aid.
Having taken office as Minister for the Environment just three months ago I am glad to be presenting to the Dáil for the first time the Environment Estimate. By any standards this is an Estimate of major importance, whether in terms of its sheer size or of the nature and range of services it sustains and which affect every citizen in one way or another. The money to be voted by the Dáil in this Estimate will provide, mainly through the local government system, many of the services essential to modern living and economic and social development.
I have come to the Department of the Environment with a keen awareness of the problems but also with a conviction that local government has tremendous potential for improving the way we govern ourselves in the broadest sense. I am now looking forward greatly to the challenge of helping to realise that potential.
In the environment area the period of office of this Government has been one of considerable achievement, notably in areas such as local government reform, housing, road development and fire services.
As Minister, I want to see progress in these and other areas maintained and accelerated where possible. I also want to see appropriate management systems operated in the Department and in the local authorities to ensure that we are getting full value for the vast expenditures being undertaken.
Of the total gross Estimate of £792 million some £591 million is classified as current expenditure and the remaining £201 million will go for capital purposes. Hand in hand with this voted capital expenditure my Department are responsible for non-voted capital expenditure of £440 million. This brings our total capital allocation in 1986 to £641 million which accounts for 38 per cent of the total public capital programme. Therefore, the total expenditure of my Department, capital and current, in 1986 will be approximately £1,232 million.
Of the total Estimate, 57 per cent goes in grants and recoupments to local authorities, another 29 per cent goes to local authorities in loan charge subsidies, 11 per cent is spent on services provided directly by the Department, 1 per cent goes in grants to State, voluntary and international bodies and departmental administration takes the remaining 2 per cent. Therefore, 86 per cent of this money goes to local authorities in one form or another. In addition to this, local authorities will also receive certain funds from other Votes bringing the total of Exchequer funding of local authorities in 1986 up to £762 million which amounts to 65 per cent of total estimated local spending on current account. When one adds to this the capital expenditure financed from the non-voted provisions of the PCP one finds that total local authority expenditure is £1,527 million or almost 10 per cent of GNP. Local authorities are also major employers sustaining about 35,000 jobs in direct employment and a further 8,000 on works carried out for them by private contractors.
This broad overview underlines the economic and social significance of the local government system in terms of resources consumed, employment provided or services made available.
My Department's programmes are major attractors of aid from the European Regional Development Fund and of favourable loans from the European Investment Bank. This year we are determined to continue making full use of the aid available from these sources. Out of a total £80 million allocated to Ireland from the ERDF £60 million will be in respect of the roads and sanitary services programmes.
I will now go on to speak individually about each of the more important programmes funded by this Estimate. In doing so I will endeavour to set out broad policies, to refer to recent or current developments and to outline my objectives for this year in the light of the funding sought.
I turn first to the organisation and operation of the local government system itself, a fundamental reform of which was initiated by the Government last year.
The reform programme for local government published last May outlined the Government's proposals. The aims of this programme were to strengthen and modernise the system, to make it more complete and to improve structures and procedures. Considerable progress has already been made. The Local Government (Reorganisation) Act, 1985, made provision for the introduction of a new system of local electoral areas in counties and county boroughs, for adjustments in the Dublin city boundary and for the definition of three new county areas in Dublin. It made provision also for the upgrading of Galway to the status of county borough and for adjustment in the Galway city county boundary. These matters have now been finalised.
The next stage is to bring the new system of local government in Dublin into play as soon as possible. The new system will comprise the corporation with its adjusted boundaries and three new county councils, as the main local authorities in Dublin having all the traditional functions. There will also be a metropolitan council nominated by the four main authorities.
At the local level, provision will be made for district councils to take care of local matters on behalf of the main authorities to promote suitable community activities and, generally, to bring the system nearer to the people.
The foregoing is the broad outline. I have only recently had an opportunity of looking into the details of the proposals for the new Dublin structures. Work is now going on in reviewing some important aspects of this. I expect that the Bill to give full effect to the new system will be coming forward in the near future. Winding up the affairs of two major local authorities and settling all their business on three completely new county councils is a complex task. Even so, it is my aim that the new system in Dublin will be in place by 1 January next and every effort is being made to achieve that. I hope for the wholehearted co-operation of all involved, elected members and officials in order to achieve what is, I believe, a widely welcomed improvement and overhaul of the local government system for the Dublin area.
We have to look on local government as just that — government at local level. I do not believe that we have ever succeeded in delivering local government effectively or completely in that sense. I believe, for example, that much of the decision-making that is done centrally in relation to various community services could and should be done locally. This would bring benefit not only in terms of greater local democracy but in releasing scarce manpower centrally for more appropriate central tasks. The reforms, therefore, include an ambitious programme of devolution covering various functions in the local government sector. Furthermore, it is envisaged that local authorities should become progressively involved in certain services which are traditionally outside that sector.
The Government have recently reviewed these devolution proposals in the light of developments in the interim and remain committed to the programme outlined in the May 1985 policy statement. Consultations are proceeding with staff interests in relation to the implementation of the decision to devolve the administration of the grants schemes for new houses, house improvements and group water supplies.
Significant changes are also in prospect in the organisation and structures and in the functions and procedures of local authorities generally. Town boundaries are out-of-date in many cases and need to be reviewed. Such a review has various territorial, functional and financial implications and I am examining those at present in order to decide on the most suitable approach to dealing with this problem.
I believe that local authorities can and should play a more creative part in promoting local economic and social development. Democratic local government should have the function and the capacity to act in the public interest in a wide range of matters of concern in a local community. I will be looking closely at the functions of local authorities which have a bearing on these important matters in the course of the reform programme.
Another matter which I am concerned about is the very limited role nowadays of town commissioners and the fact that there is no local government body in many of our smaller towns. The kind of local authority body which I have in mind for these towns is one that would be closely related to the community, that would promote local economic and social improvement, that would undertake the delivery of local services and represent the town interests in dealings with major local authorities and other statutory and private organisations.
It will be clear from what I have said that the approach to local government reform is comprehensive and that there are many facets. It will, therefore, take time to complete this programme but progress has been made and is continuing and this item will remain high in my priorities.
As I said earlier, some two-thirds of all local authority expenditure on current account is funded in one form or other by the Exchequer. A sum of £497 million of this funding comes in the form of subsidies, grants and recoupments for specific services—£419 million through this Vote and £78 million through various other Votes. The remaining £264 million comes as rates support grants in the form of general grants to be applied at the discretion of the authorities themselves. The first thing to be said is that the combined effect of this level of cash support and the complementary set of financial measures will be to effect a worthwhile overall strengthening of the financial position of local authorities this year. I should explain briefly to the House why this is so.
This Estimate includes a sum of £264 million in respect of the combined rates support grants. Although this is nominally less than the corresponding provision in 1985, it does, in fact, represent an increase of 6¼ per cent in the overall financial resources of local authorities when the other three elements of the 1986 package are taken into account.
The first of these elements is the abolition of the levy for the supplementary welfare allowances administered by the health boards. Levies on their finances in respect of national services, over which they have little or no control, has been a constant cause of complaint by local councils for several years past. The levy in respect of supplementary welfare allowances amounted to £19 million in 1985 and had they been in operation this year on the same basis they would have cost local authorities over £21 million. Instead, there has been a corresponding increase in the Social Welfare Estimate from which the grants will be paid direct to the health boards and local authorities have been relieved in full of all costs in respect of this scheme as from January this year. This levy represented the most onerous of the statutory demands. It affected all countries and county boroughs directly and affected urban district councils through the county demand on the urban councils. Its termination represents a major step forward in remedying one of the most widely criticised features of local finance.
The second important aspect of this year's package is the freedom given to local authorities to use a greater proportion of the receipts from the sale of houses for revenue purposes. That measure is intended to make more efficient use of surplus funds held by urban authorities which are not required for specified purposes such as SDA loans. It will place about £16 million more at the disposal of local authorities for general revenue expenditure. I recognise that some urban authorities may experience a temporary cash flow problem because of this and, as they have already been told, the arrangements made in individual cases may be open to review when more detailed information regarding individual local authorities has been obtained and assessed.
The third new element in local authority finance this year will be the commencement of revenue from the farm tax. In deciding on the level of the grant in lieu of rates on agricultural land the Government assumed farm tax receipts of £6 million in 1986. In the longer term, this tax represents an important new source of local revenue which will progressively reduce the dependence of local authorities on the Exchequer and bring more equity into our national taxation system.
The positive impact of this package on the financial resources of local authorities will be significantly enhanced by the favourable trends in the national economy which are becoming more pronounced as the year goes on. In view of their large borrowings, local authorities stand to gain significantly from falling interest rates. For instance, the 3 per cent reduction in the local loans fund rate at the end of last year will save them about £5 million overall this year. Last week's further drop of 1½ per cent in the same rate will have a consequent saving of £1 million this year for local authorities. The falls in the rate of inflation and in energy costs are also bringing substantial benefits to local authorities. Again to give an example—the price of bitumen has fallen by 20 per cent in the last few months and that should have a saving effect of £2 million for local authorities.
Their enhanced financial position in 1986 will enable local authorities to continue and develop the many important services they provide for the community and on which employment and the development of local areas are so dependent.
For the future, I intend to examine the various financial options to ensure a reasonable and efficient flow of funds to local authorities without excessive dependence on the Exchequer. Some of these options have already been examined by the National Economic and Social Council and the Commission on Income Taxation whose conclusions I will bear in mind when reporting to the Government on this matter in due course.
As Minister for the Environment I have a responsibility for monitoring the overall performance of the building industry. There is no point in denying that the industry has been suffering a severe decline virtually since the start of this decade. Output — especially in the industrial and commercial sectors — has dropped steeply and there has been a big shake out in employment in that industry over that period. This has been brought about by the over-supply of building space as a result of the building boom of the late seventies and by the steep downturn in private sector construction investment which resulted from the over-supply and from the severe economic recession. In many sectors the underlying demand for construction is determined by a range of economic, financial and demographic factors which are not amenable to direct Government control.
Last year was the best year for the industry since the present recession began. While there was a further marginal fall in the volume of output it is encouraging to note that by the end of last year, unemployment had stabilised and, indeed, began to show an improving trend in the early part of this year.
This Government have maintained direct public investment in construction via the public capital programme at the highest possible level. Public capital expenditure affecting the industry in 1985 was up by 4 per cent on 1984 and the provision for this year shows a further 3 per cent increase. However, the single most important thing any Government can do for the industry is to implement sound economic policies that restore stability and growth to the economy and promote a climate conducive to investment. With a projected growth of 3-4 per cent in GNP this year and with considerably lower interest and inflation rates, the Government can claim considerable success in restoring a general economic climate favourable to the building industry.
In addition to providing this foundation for improved performance in the industry the Government have over recent times taken a series of important measures which should stimulate activity and allow full advantage to be taken of the more favourable economic conditions. These measures comprise substantial incentives for private investment in house improvements and urban redevelopment, a special investment programme in amenity projects and the curtailment of black economy operations.
I will be coming back to the new scheme of house improvement grants in the context of housing policy but I would mention here that if work proceeds on the applications received to date the value of such work would represent about £250 million and result in 10,000 jobs. I will also be dealing later on with the urban redevelopment incentives and the amenity programme for which provision is made in this Estimate.
The difficulties of the legitimate building industry have been greatly exacerbated over recent years by the extent of "black economy" operations. Being fully aware that these practices adversely affect employment, prevent fair competition and threaten legitimate firms, the Government have taken strong measures to counteract the "black economy".
Grants under the improvement grants scheme are being paid only in respect of work carried out by registered contractors and this will shortly be extended to the new house grants scheme. The tax clearance certification scheme introduced in 1983 for all public sector supply contracts over a £20,000 threshold is being expanded to include construction contracts, including sub-contracts, and the threshold is being reduced to £10,000. In future, clearance from the Revenue Commissioners will be required before any contractor or sub-contractor may be employed on a public construction project. Arrangements designed to ensure closer co-operation at local level between the Office of the Revenue Commissioners and the Department of Social Welfare are being put in place and the special inquiry units of both these offices are being expanded. Also my Department have circularised local authorities reminding them of their obligations and powers in this regard and requesting them to take action in the matter.
A new provision of £30,000 is included in this Estimate to provide secretarial and research facilities for the proposed Construction Industry Development Council which I am confident will play a useful role in guiding the future development of the industry. The council will be representative of all the principal interests connected with the industry and will have wide-ranging functions related to the performance of the industry. It will, for example, carry out or sponsor, research into such matters as the scope for increasing the industry's efficiency and effectiveness, examine ways and means of minimising undue fluctuations in construction output and provide a forum for regular discussion for the various interest groups concerned with the industry's welfare.
All in all then, there are very good grounds for believing that considerable progress will be made this year towards ending the decline in the building industry.
This Estimate provides a record level of grant and subsidy assistance to private house building. Between the £2,000 grant and the mortgage subsidy a total of £46.5 million is being provided, compared with expenditure of £33.1 million last year which was in itself a record. Last year nearly 11,000 grants were paid, costing over £12 million and the provision of £22 million for this year reflects the increase in the new house grant from £1,000 to £2,000.
The conditions of eligibility for the £2,000 grant were widened during 1985 to admit former tenant purchasers of local authority houses surrendering their house to the local authority under the £5,000 grant scheme. Under the Housing (Miscellaneous Provisions) Bill, 1985, now before the House the new house grant and the mortgage subsidy will, in certain circumstances, be payable to a previous owner occupier or the spouse of an owner occupier who is in need of housing following marriage breakdown. The £5,000 tenants' grant is also boosting new housing output as over 40 per cent of the beneficiaries are purchasing new houses.
When the previous Coalition Government of which I was a member took office in 1981 we were faced with a situation that, for the first time since 1924, grants were not available for the improvement or conservation of the housing stock. The Government regarded this situation as completely unacceptable and we managed in very difficult budgetary circumstances to introduce a limited scheme of house improvement grants in October 1981. The main emphasis of this scheme was on the provision of basic amenities. We always recognised that the scope and size of the grants should be improved as soon as circumstances permitted and thankfully this has now been possible. The house improvement grants scheme which was announced by the Taoiseach on 23 October 1985 has been an enormous success with demand at an unprecedented level. To date over 70,000 applications have been received.
It is evident from this extraordinary level of interest in the grants that we have a scheme that meets two important objectives at once. It is proving a major boost to the building industry, as I have already said, and it is contributing to the conservation and improvement of the housing stock — a major national asset. I am pleased to note that many of the financial institutions are responding to the demand for additional loan finance to supplement the grants. For my part I have notified local authorities of a doubling in the amount of unsecured loans which they may advance for home improvement — from £1,000 to £2,000. For many householders on lower incomes this will bridge the gap between the cost of necessary home improvement and what they get by way of grant. Of course householders borrowing for house improvements also benefit from tax relief on interest paid.
In order to cope with the volume of applications — which has continued to be away ahead of expectations — we have taken a number of steps to ensure that delays in the processing of applications do not negative the impact of the scheme. When the scheme was announced we immediately took action to increase the capacity of the administrative staff and of the inspectorate. We introduced a bonus scheme for existing inspectors and recalled, in a temporary capacity, a number of experienced inspectors who had retired. We then started the process of recruiting a further 37 temporary inspectors from suitably qualified people who were unemployed. It became clear at that stage that even this would not be enough to prevent a serious backlog of cases awaiting inspection so I decided, as an exceptional measure, to dispense with the prior inspection requirement for all valid applications received in the Department by close of business on 25 February 1985. We wrote to all such applicants telling them they could commence work immediately subject of course to their complying with all the other conditions and inspection of the work on completion. Of course any applicants who still desire an inspection to clarify their entitlements may request one but I wanted to ensure above all——