Vol. 486 No. 3
50 Mr. Dukes asked the Minister for the Environment and Local Government the proposals, if any, he has for the distribution of the proposed local government fund to local councils in a manner which equalises differences in the spending needs and revenue capacity of the different councils, in view of his announcement in Athlone on 12 January 1998; and if he will make a statement on the matter [2469/98]
I intend to distribute fairly the funds available in 1999 under the new local government fund by reference to criteria to emerge from a needs and resources study which my Department is funding and which will be undertaken this year as a pilot study by Galway County Council. The study will initially focus on Galway County Council, Galway County Borough and Ballinasloe UDC and will involve the development of a set of indicators which will facilitate the measurement of the needs of each local authority service area and the capacity of the authority to meet service needs given resources and capacity to raise resources. The methodology and draft models to emerge will be capable of application to all local authorities. When the study is completed towards the end of this year each local authority will be considered by reference to the study criteria and funds will be distributed accordingly in an equitable fashion.
Is the Minister aware discussions took place some time ago with a number of local authorities about possible criteria for such a scheme? Will he agree a study that is confined, albeit to several local authorities but to one county area, is not likely to produce usable guidelines whereas the question of equity will require comparisons to be made between different county councils with different tax bases and different needs?
Discussions took place with a number of local authorities, but in order to ensure fair and equitable distribution of money a little more than anecdotal evidence is required by the Department on what might be needed. I agree with the Deputy that to focus on one local authority would not be satisfactory. We will use this study as a basis for methodology which will be applied to each local authority, and each local authority will then be asked to undertake its own study of needs and resources. Financing will be based on the composite picture rather than on the needs of one local authority. In regard to the local authority selected, there is a borough council, an urban council and a county council involved and the intention is to draw up parameters for those kinds of circumstances. I agree it would be unfair to apply across the board the findings of the study of one local authority and that is not the intention.
Will the Minister agree the discussions that took place with a number of local authorities produced much more than anecdotal evidence? Is he aware there was a strong view among members of many local authorities, regardless of whether it was justified, that the outlines of a system had emerged and there was a degree of consensus on how the system would operate? Will he accept that to consider a different system, which he seems to have in mind, is turning his back on what was very valuable consultation with local authorities?
Will the Minister agree that rather than undertake a study that includes different local authorities in the one county, as is proposed, it would be more relevant to base a pilot study on a comparison between one local authority, or set of local authorities, which has a strong base for local taxation, whether commercial rates, motor tax or whatever, and an authority at the other end of the scale which does not have such a strong base? It would not be stretching ingenuity to find two appropriate local authorities to make such a comparison.
I do not know why the Deputy thinks I am turning my back on consultation that has taken place. We are trying to build a composite picture and the methodologies that apply in the Galway study will be applied to each local authority. The needs and resources of each local authority will not be based on a local authority with a huge or a small funding base but will be considered separately, and funding will be distributed accordingly. I take the point the Deputy is making, but he may be under a misapprehension as to what is intended in the study in Galway. The intention is to set up a framework to allow us to carry out needs and resources studies of all local authorities so that we have a true picture of each authority before we distribute money.
The Deputy will be aware of an exercise carried out some years ago on needs and resources and most people agreed at that time that a theoretical approach would disadvantage a large number of local authorities. The approach we are adopting is a practical one based on the realities on the ground rather than on a theoretical desktop exercise. We want to be fair to each local authority.
If I am under a misapprehension as to the Minister's proposal, part of the reason may be that his explanation is not entirely clear. Is the Minister aware there is a substantial level of disappointment, if not anger, among local authority members of all parties in view of the fact that, having engaged in meaningful consultation, as they thought, with the Minister's predecessor and reached a measure of agreement on guidelines, they now find they will have to wait another year? Is the Minister aware that compared to the exercise carried out by his predecessor, the system he has outlined seems theoretical, particularly since it lacks an element of comparison between different local authorities in different circumstances?
Perhaps I am not explaining the matter clearly or perhaps the Deputy has difficulty understanding the local authority system.
The first is the case.
Other people will have to judge that.
Local authority members will give the Minister their view.
In the past six months I visited approximately 20 local authorities. They have had an opportunity to speak to me and to listen to me and I have had an opportunity to listen to them. I may be losing whatever political skills I had, but I do not detect the anger and annoyance to which the Deputy referred. If the Deputy conducted the same exercise, perhaps his views and perceptions, from wherever he is getting them, might be changed somewhat.
The Minister is a patronising little gent.
I am not. I leave the patronising to the Deputy. He seems to be an expert at that.
The Minister is being smug.
The Deputy would be well able to give us all lessons in smugness.
We are focusing on Galway County Council, the Galway County Borough and Ballinasloe Urban District Council. We are trying to develop a set of indicators which we can apply to other local authorities. Then those local authorities which have real need for resources will be able to make the case for equalisation funding. We are not talking about theory, but about local authorities being given the opportunity to make their case and outline the resources which they need. We will judge from that what they will receive from the equalisation fund.
51 Mr. Howlin asked the Minister for the Environment and Local Government the funding for local government which he proposes to implement. [2458/98]
53 Ms Clune asked the Minister for the Environment and Local Government the proposals, if any, he has to introduce the cap on commercial rates which he announced on 12 January 1998; the nature of the proposed cap; whether it will be uniform for all rating authorities; the effect, if any, it will have on the autonomy of local authorities; and if he will make a statement on the matter. [2467/98]
I propose to take Questions Nos. 51 and 53 together.
The funding system which I recently announced will come into effect on 1 January 1999. It involves the establishment of a new local government fund. The fund will be financed from two sources, the proceeds of motor taxation and an amount provided by the Exchequer. The amount provided by the Exchequer will be £270 million in 1999.
On the basis of current estimates of motor tax, the fund will be of the order of £590 million in its first year and will provide significant additional money for local authorities. This will enable authorities generally to improve the quality and range of services they provide.
The fund will be buoyant, ringfenced in law, channelled exclusively into local government and, importantly, protected for the future. The £270 million contribution from the Exchequer will be provided for in legislation which will also provide that this contribution will be increased annually to reflect inflation and any changes in the functions or the cost base of local authorities.
As part of the new funding package, I propose to take steps to cap rates on commercial property with effect from 1 January 1999. I am at present considering various options on capping rates and I will announce specific details of the proposal later this year in plenty of time before local authorities adopt their estimates for 1999. The proposal will be designed to ensure that the rate demand on the business sector is neither excessive nor disproportionate to other sectors of society. The increased resources which the new funding system will deliver will facilitate this measure. Overall, the new funding package will substantially enhance the autonomy and discretion of local authorities by putting greater funding at their disposal.
To complement the increased level of resources which the new funding package will generate, I am developing measures to improve the financial management systems in local authorities and to ensure that value for money practices pervade all local authority operations.
I will bring legislation to give effect to the new funding proposals before this House shortly.
Would the Minister agree that his proposals simply boil down to a relabelling of funds which were to be allocated in any event, that he is simply replacing money to be paid on the non-national roads with motor taxation and calling the non-national roads fund a local government fund, that the motor taxation was to be made available to local government in any event by law enacted by the Houses last year, and that by next year we would be spending approximately £270 million of Exchequer money on the non-national roads programme in any event? Would the Minister accept that it is not really a new deal except that it diminishes the authority of local government to have any fiscal autonomy whatsoever with a proposal to cap rates? Would the Minister accept that that proposal will mean, in effect, that those who are efficient are to be punished and those who have allowed rates to be rampant in recent times are to be rewarded?
Will the Minister give some indication of how the £320 million roads fund will be allocated? Will it be on the basis of road need or of some linkage to the amount collected? Will the Minister give us some notion of how the equalisation fund will operate? How much money will be available for redistribution through the system of equalisation and who will control it?
I would not agree that any of the local authorities over the past four or five years in particular allowed rampant increases in commercial rates.
Then why is Minister capping them?
I will explain that to the Deputy in a moment. It would be unfair to say that about any local authority because the figures show that the average increase was approximately between 4 per cent and 4.5 per cent.
Why is the Minister interfering with it?
The Deputy has asked me about five questions. If I answer those, he can ask me further questions if he likes.
I do not accept the Deputy's contention that this is merely a relabelling of funds. He makes out that there is no difference in the funds to which he refers and that this money was to go to local government anyway. That is not true. There is an increase of £125 million in the package available for local authorities.
Compared to last year. Over two years it would have reached that anyway.
The Minister without interruption.
It is a con.
There will be an extra £125 million available to local authorities from 1 January 1999. That is not to be sneezed at. Local authorities have welcomed this and I do not accept that it is a relabelling of funds.
I have ensured for the first time that motor tax will be geared largely towards funding for non-national roads. That is an important link.
The Minister opposed it one year ago.
No. I knew the Deputy was about to interrupt with that, but he was not here when I opposed the concept of the local government system being funded by motor tax receipts.
The Minister is relabelling the money as something else.
We are specifically tying motor tax largely to funding for non-national roads and that is an important link.
It is sophistry of the highest order.
With regard to the basis we will use for the funding of roads, this year's allocation will reflect our consideration of the study to which the Deputy refers and money will be allocated largely on the basis of priorities identified in that programme.
I would agree that the local authorities' autonomy is being undermined. Local government is local people elected at local level to implement local decisions. If they are dependent on handouts from Government and if their means of raising funds at present, commercial rates, is being capped, this is a further reduction in their autonomy. How does the Minister propose to distribute the £125 million between 29 county councils, five county boroughs, five corporations and 49 urban district councils? If inflation rises above the cap, how can local authorities maintain their services, given that a significant proportion of that funding comes from commercial rates?
Deputies should wait to see how I intend to apply the cap before criticising it because the rate of inflation is one of the considerations which relates to the level of any cap. I do not foresee a situation arising where the cap will be set at a level lower than the rate of inflation. That would be grossly unfair to everyone involved.
How do I intend to allocate the money? My reply to the first question I answered this afternoon, which was tabled by Deputy Dukes, is part of the entire process of how we intend to allocate the funds.
The Minister does not know how they will be allocated.
We intend to allocate the funds on the basis of need which will be firmly established by the exercise currently being conducted within local authorities, namely, the needs and resources studies. We intend to allocate the funds fairly on the basis of objective criteria.
The Minister's reply is somewhat theoretical.
Is it not correct that the need will vary from year to year?
Yes, the need will vary from year to year. One of the problems we face is that, by continuing to increase the amount granted to local authorities each year, on an incremental basis, by reference to inflation — without a system of value for money, performance indicators, an accounts accrual system or modern accounting systems being in place — efficiency will never be achieved. In addition to funding we are concerned with a large range of measures some of which were initiated by my predecessor and others I intend to put in place to ensure that value for money is achieved, needs are met and resources are provided.
It is slightly unfair that Deputies are obliged to consider the funding proposal without being aware of the other measures being put in place by the Department. However, crocodile tears regarding the autonomy of local government, etc., ring hollow in my ears in light of the previous Government's record on local democracy.
Ringfenced and inflation-proof.
Does the Minister remember rates?
Will the Minister reply to a specific question on the equalisation fund? The proposal put to the House by the previous Government was that 80 per cent of motor taxation should be spent in the local authority area where it was collected and that a balance of 20 per cent should be placed in an equalisation fund to be distributed according to need. Now that a substantial amount of this money will be used for roads, is there any prospect of the bulk of it being spent — as originally demanded by local authorities — in the counties where it is collected or will it be given to the counties with the worst road systems? Some counties might collect large amounts of money and not be able to spend it. What mechanism of equalisation is being put in place and what percentage of the overall amount will be made available through equalisation?
Does the Minister accept that the proposal to cap the ability of local authorities to set local rates is the final nail in the coffin of local government's fiscal autonomy? Does he accept that his heart is not in this proposal, which is merely a sop to a demand from the Progressive Democrats? Given that the Minister indicated he intends to remove the proposal to allow local authorities to fix, or not do so, as the case may be, a 3 per cent increase in motor taxation, does he agree this will finally remove any remaining discretion on the part of local authorities to set local rates? If the latter comes to pass, there will be no single fiscal measure available to local authorities in respect of collecting revenue. With what autonomy will they be left?
I would be more concerned about the Deputy's fears in respect of local authorities and their autonomy if I did not have access to his record as my predecessor.
The Minister is implementing proposals I put in place and he should not state that he is doing otherwise.
Crocodile tears do not impress me.
The Minister does not have one new idea.
Deputy Howlin should allow the Minister to conclude his reply.
The Minister is being abusive.
I know the truth can hurt.
We are discussing the Minister's record.
What about the period 1992-94?
I ask the Minister to stop provoking interruptions because the time for priority questions is limited. Deputy Howlin should allow the Minister to conclude.
Is Deputy Howlin permitted to shout abuse without my responding? I am not going to listen to him shouting abuse at me.
I am being provoked into doing so.
As already stated, the crocodile tears from Opposition benches in respect of local government autonomy——
What about the period 1992-94?
What does the Minister intend to do?
Deputies should allow the Minister to conclude or we shall proceed to deal with another question.
He has not yet answered the question before the House.
Will Deputy Howlin cease interrupting so that I may answer the question?
The Minister should stop handing out abuse and begin providing answers.
If the Deputy stops shouting abuse, I will stop returning the favour. The proposal, which the Deputies do not seem to have read carefully, states there will be a local government fund of £590 million. This will be a composite fund, out of which costs for the maintenance, repair, restoration, etc., of non-national roads will be paid. I stated on three occasions during this afternoon's Question Time that moneys will be made available to local authorities on the basis of their needs and resources. That is the proposal I will be bringing forward and that is what equalisation is about. The total amount to be made available to local authorities will be £125 million more than the current figure.
Does the Minister have plans to extend the base on which commercial rates are applied? Would he consider extending them to commercial interests such as establishments which provide bed and breakfast, etc?
I have no plans to extend the rates base at present. That proposal has been put to successive Governments. If the Deputy wishes to bring forward a proposal, I will give it every consideration.
How kind.
As the time for dealing with priority questions is concluded, we will proceed to deal with ordinary questions. Question No. 54 can be taken now.
What about Question No. 52?
Question No. 52 cannot be taken because only the fourth and fifth questions can be taken in ordinary time. The third question nominated for priority must be taken within the 20 minutes allocated. As that time period has concluded, the question falls by default.
I congratulate whoever thought up that ingenious system.
The Deputy's party was responsible.
The system was put in place long before I became Leas-Cheann Comhairle.
