Brendan Howlin
Question:7 Mr. Howlin asked the Minister for the Environment and Local Government the plans, if any, he has to fund local government; and the changes, if any, he proposes to the Local Government (Financial Provisions) Act. [16427/97]
Priority Questions. - Local Authority Funding.
I am formulating a comprehensive package of measures in relation to local government funding. Legislation giving effect to these measures will be brought before this House as soon as possible, and will primarily enable the establishment of a local government fund.
The fund will be made up of a specific percentage of national taxation, which will replace the system introduced by the last Government, of allocating motor tax for the discretionary use of local authorities. The new fund will also replace other specific grants paid to local authorities. Non-national road works will be funded from motor tax income. Parts of the Local Government (Financial Provisions) Act, 1997, will be repealed to give effect to the Government's local government funding proposals. I also propose to require local authorities — using existing legislative powers — to limit increases in rates. This will be done in conjunction with the introduction of the new funding system.
The Minister's reply is similar to the response he gave to the debate last July when he promised he would spell out his funding plans within a matter of months. We do not appear to have advanced much from then.
How much money is now in the specific fund from motor taxation created by the previous Government that was to be distributed to local authorities? It was approximately £100 million midway through the year. Will it be given to local authorities?
What elements of national taxation will be incorporated together before a percentage is divided among the local authorities? Will it include income tax, VAT, corporation tax or all of these things?
On the question of taxation, the percentage of national taxes and their nature, the Deputy must await the production of the legislation. Given that it must be passed by the Government I do not propose to elaborate on it. With regard to his proposals for local government funding, in the last account I received some time ago, it was expected that the buoyancy in motor taxation would amount to approximately £3 million.
It is surprising the Minister does not have the figure before him regarding the special fund that was created by the previous Government. All motor taxation went into this fund from 1 January to be released to local authorities. Where is that money now? Will this important pool of money, which was ring-fenced for local authorities, be available to them in its entirety or will the Minister leak some of it back to the central Exchequer?
Given that the Deputy brought the legislation through the House I am surprised he cannot recall the figures.
The figure changes every day depending on the amount paid. What is the current figure?
I indicated it. The only difference is there will be a buoyancy of approximately £3.7 million.
How much is to be provided to local authorities?
I do not know. When the Deputy was Minister in the early part of 1997 he provided local authorities with money from the fund. I do not keep a daily account of the fund, but I assure the Deputy the money has been ring-fenced. At my various meetings with the local authorities I have recognised the achievement by the previous Minister in ring-fencing it. That money stays within the local government system and I have no intention of leaking it beyond that. There is currently no change in this policy.
Currently?
I have no intention, at any stage, of allowing any of the motor taxation money to go anywhere other than local authorities. However, it will be only part of the overall local government fund. I intend to add rather than subtract from it.
It is helpful to know that the entire pool of motor taxation, envisaged in the Local Government (Financial Provisions) Act, will be ring-fenced and retained in the local government system. In addition, a new fund, comprising a percentage of national taxation will also be available to local authorities. Will the Minister confirm his legislation will create this new fund in addition to the existing fund? Who will administer this new fund and how will the money be distributed?
I will be as specific as possible regarding the arrangements. I do not envisage that there will be a second fund but a percentage of national taxation will be added to the existing pool which will be ring-fenced. There will be one new fund for local government from which local authorities will be paid. Initially they will be paid by the Department on the current basis but a number of other changes will be introduced over time to the local government funding system. Value for money audits will be carried out and criteria for financial indicators will be set down in legislation. A package of reforms will be put in place.
They are set out in the programme for change.
They, and a number of additional aspects, are also set out in the programme for Government.
The Government copied them.
As the former Minister, Deputy Howlin, is aware it is also necessary to establish an equalisation fund to ensure that the weaknesses of some local authorities and the special needs of others are addressed. These issues will be covered in the local government funding package I will introduce. This will ensure the system is financed on a new basis and that taxpayers get value for money for the funds given to local authorities from central taxation.
I am glad the Minister has been converted to the idea of utilising this money for local government because that was not his original response. Will the Minister confirm that in addition to this fund, the Government will meet the firm commitment of the previous Administration regarding a separate allocation to local authorities for the county roads special restoration fund? Local authorities should not be expected to meet those costs from this fund. The previous Government gave a firm commitment that the county road restoration fund would be additional to this fund.
It is the Deputy's contention that a conversion has taken place. However, I have made the same points consistently since before the last general election. I may be suffering from the same thing the former Minister suffered from when he mentioned 3 per cent and 6 per cent in his document.
It was slow learning on the Minister's part, but he learned eventually.
It appears slow learning is not confined to this side when it suits. Regarding motor taxation, the Deputy when he was Minister——
I refer the Minister to his speech on 9 July.
The Minister without interruption.
I criticised Deputy Howlin when he was Minister for allowing the local government system to be towed behind the family car. That was my major objection to local government being financed solely from the proceeds of motor taxation. This tax will be used now for the necessary funding of county roads.
It will be taken from the fund.
It will not be taken from it; it is additional to it.
The Minister has just added to the load on the tow bar.
The Minister is taking money from the fund——
I am not taking money from anywhere.
——and giving it to county roads.