The essence of local government is local empowerment and decision making, but the concept of empowerment means little if anything without resources to back it up. For years we have witnessed cracks and strains developing in our local government system as it became overburdened with an ever expanding cocktail of functions. I am not against giving more functions to local authorities, but I am against giving them more functions or more so-called powers without providing resources and money to carry out those functions and to exercise those powers.
The record of the House will show my consistency in this over the years. I have long been an ardent proponent of local government. I have long argued for its right to exist hand in hand with central government. I have long believed in its potential to serve communities. I am not and never have been convinced of the benefits of paying lip service to a lame local government system. We could conceivably be better off abolishing local government rather than presiding over its gradual downfall. I am not suggesting the local government system is lame, powerless or without merit. However, I am sounding the alarm bells and giving a clear signal that if something constructive is not done to properly resource local authorities, the future for local democracy, local empowerment and local communities is bleak. It is a measure of the resilience of the local government system that it has survived its difficulties and is still around for revival.
It was in recognising the importance of local government and in realising the threats and difficulties it faces that our programme for Government highlights it as a priority. The principal aim of the Government in respect of local government, as set out in An Action Programme for the Millennium is: “the restoration of real decision-making and power to local authorities and local people”.
The key priorities identified in the programme for government, some of which the Minister mentioned in his speech yesterday evening, are establishing a statutory local government fund which will be a fixed percentage of national taxation; allowing greater discretion to local authorities in spending priorities based on their performance and the value for money they obtain; "capping" increases of commercial rates; financing county road improvements from national motor tax receipts with suitable equalisation and such funding to take into account the findings of the National County Roads Survey; introducing comprehensive value for money audits for all local authorities; improving efficiency throughout the system; enhancing the concept of customer service in local government; removing the "democratic deficit" by restoring real power to the elected members and, finally, facilitating a new partnership with the community and voluntary sector. Although work was started on some of these issues by the previous Administration, the financing plans we propose are innovative and will provide a solid platform on which local government can look forward with confidence to making a continued and improved contribution to the lives of all our citizens.
The first thing to be said about the Government's revised proposals for local funding is that they do not involve the introduction of any new form of taxation. Our programme for Government clearly states our recognition of the need to reduce the burden of personal taxation to reward effort and to give people an incentive to take up work. To that end we have outlined our commitment to reduce the basic rate of income tax to 20 per cent and the higher rate to 42 per cent over the next five years with an objective of reducing the higher rate to 40 per cent if economic circumstances persist. We have also given a commitment to increase basic allowances at least in line with inflation at each budget.
Our proposals on local government are therefore entirely consistent with our overall taxation proposals. Linking certain local government expenditure with national taxation, through the mechanism of the local government fund will have many advantages for local authorities. It will enable local authorities to prepare and adopt their estimates with a large degree of certainty as to revenues they are likely to receive. The situation that obtained heretofore was unacceptable, where the estimates process and all the important local policy and spending decisions involved in that process, had to be completed in the dark as to potential future revenues. For example, in recent years it was only after the estimate was actually adopted that a local authority was notified of its rate support grant for the following year. The previous Government's funding proposals would have improved the situation somewhat but the reality is that authorities would have continued to be asked to adopt their estimates blindly as they waited to see what sort of an allocation they could expect from year to year from a combination of retained motor tax proceeds and equalisation funds. Providing a specified percentage of national taxation to local government will ensure that local authorities will in the future be in a position to know the level of income they may expect to receive in the following year from the State.
Perhaps the most critical element in any funding system is that it should be capable of producing a sufficient yield to enable the business at hand to be carried out in an effective and efficient way. The KPMG report on local government funding identified lack of buoyancy as one of the greatest drawbacks of the funding system then operating. While there is undoubtedly a degree of buoyancy in motor taxation, the extent to which this tax alone had the capability, apart altogether from doubts about its appropriateness, to fund the ever expanding demands on local government is questionable. Linking local government to national taxation will ensure there is a significant degree of in-built buoyancy in the local government fund.
As I suggested, there are doubts about the propriety of using motor tax to fund all of the services which the local government sector is expected to deliver. It was clear from public reaction while we witnessed the embarrassing difficulties of the previous Government earlier this year on the issue of group water schemes and private water supplies, that it was not acceptable to use motor tax to fund the abolition of water charges primarily in urban areas.
In addition to the new local government fund, the Government will also re-establish the old road fund concept which existed until 1978 and under which motor tax funded part of the roads programme. The Minister discussed the whole roads issue in detail yesterday and I do not intend to go over that ground again other than to fully endorse the view that it is entirely fitting that motor tax should fund roads and not water supplies. I am sure Deputies will support the Government's commitment to take account of the findings of the national county roads survey in making future allocations to local authorities for their road programme.
Deputy Howlin asked about the Government's commitment to the provision of social housing. An Action Programme for the Millennium provides the framework for the Government with regard to housing. We are committed to providing a suitable standard of accommodation for all. One of our key priorities is to continue the local authority housing programme as the mainstay of the response to meeting social housing needs. It is my intention that local authorities will continue to meet the programme with high quality dwellings provided in a socially sensitive way.
A number of schemes exist to assist local authorities to improve substandard housing and to upgrade the physical environment in certain older local authority housing estates. The Government will continue its support for the remedial works scheme and the estate improvement programme. These will assist local authorities in tackling the environmental and related problems of severely run down urban housing estates and flat complexes. They will help eliminate or modify certain undesirable aspects of the layout and design of estates, carry out improvement works to enhance the living environment for tenants and establish improved estate management arrangements.
With regard to social housing measures, I am concerned that the output on some of these schemes has not reached its full potential to meet social housing needs. I will examine how the uptake of the schemes might be improved and I will impress on local authorities the need for more active promotion by them of the various measures. The voluntary sector has grown rapidly and its continued efforts in providing an alternative to local authority housing will also be supported by the Government.
In keeping with An Action Programme for the Millennium, the Government will make an all out assault on disadvantage. We will seek to establish an inclusive society where all citizens, including the homeless and the travelling community, have the opportunity to participate in social and economic life. We want everyone to share in the benefits of economic growth.
Another area, linked to the renewal and regeneration of local communities and of particular interest to me, is that of the urban renewal schemes which have operated in various centres since 1986 and which have succeeded in attracting major private investment into run down and derelict areas. This was confirmed in a consultants' study on the schemes published last year. In areas where the urban renewal scheme has achieved its objectives a proactive local authority has been identified as one of the major contributing factors. Many local authorities have put much effort into making the schemes work in their areas. They have actively promoted the schemes among the investment community and they have facilitated developers with pre-planning consultations. In some cases they have used their compulsory purchase powers to regularise difficulties with the title to derelict land, thus freeing it up for development.
The willingness of local authorities to respond positively in this way to the introduction of the urban renewal schemes is heartening. It has also highlighted the case for local authorities to take the lead role in the urban renewal schemes of the future. As Deputies will be aware, there are plans to introduce a new urban renewal scheme in August next year when the current scheme expires. The new scheme will be more integrated and focused than the schemes to date. The physical renewal which the schemes encouraged will no longer be seen as an end in itself. It is now recognised that any future scheme will have to become a means towards securing the overall socio-economic renewal of run down areas. The new scheme was developed in that context. Its successful implementation will require a significant amount of planning and this process has already started. A major element of the planning process will be the identification of priority areas for renewal and the preparation of plans which show how each area's physical development is to be linked to its wider renewal.
In recognition of their pivotal role in the development of their areas, local authorities must take the lead role in preparing these plans. This process will be participative, one in which all the relevant local organisations and communities will have an input. In effect, local authorities will be working in partnership with the other relevant interests. Local authorities recognise the merits of a more planned approach to the new scheme, an approach to which I am confident they will respond enthusiastically.
One of the proposals contained in the Government's action programme relates to the capping of rate increases and the Minister touched on this point briefly yesterday. Behind the proposal is an appreciation of the need to provide for the needs of local authorities while at the same time ensuring that rate increases do not adversely affect the competitive position of the commercial sector. While it is important that certainty exists in local government funding — the Government's proposals will help to achieve this — it is equally important that the commercial sector will know what it is expected to contribute to local government. This will enable businesses, small businesses in particular, to map out their financial commitments and plan accordingly.
In 1997 total local authority current expenditure will amount to over £1 billion. Of this, about £360 million will be obtained from commercial rates. This income is significant for local authorities and is used to provide important services which benefit all sectors of the community, including commercial ratepayers. The Government's concern relates to rate increases which are far in excess of inflation. Not alone must the commercial sector pay rates but there are other costs for business such as charges for water, refuse and costs involved in pollution licences, fire certification, building control compliance, development contributions, etc. We do not want business to be put at a competitive disadvantage as a result of local authority charges. Therefore, we are examining this whole area to ascertain whether and to what extent central control or capping of commercial rates is needed.
The positive actions set out in An Action Plan for the Millennium, together with the momentum already evident in local government, due in no small measure to local authorities' response to the challenges set out in the last Government's Better Local Government document, will ensure a bright future for local democracy, local communities and local businesses.
