Senator Haughey, in his contribution last week said he interpreted the motion as not condemning the cuts but that they were indiscriminate and unplanned. He was quite right in his interpretation but the Opposition have not substantiated their allegation that they were indiscriminate and unplanned. I am not here to attack the Opposition's motivation in putting down this motion, that is not necessary. I am happy to advocate the Government's position in relation to local authority funding. When one realises that between current and capital expenditure local authorities will spend in excess of £1.6 billion in 1987, it has to be recognised that this area of expenditure constitutes a significant proportion of total public expenditure. There is also an important area of expenditure of relevance to the whole country and each part of it. Local government activities impinge on nearly every service we utilise in our day to day lives.
As Members of this House will realise, most of the local authority funding emanates from the Exchequer. Taking 1987 as an example the Exchequer contribution to the current funding of local authorities is estimated to be £800 million in the form of grants, for the most part coming from my Department. This represents in excess of 60 per cent of the day to day spending of local authorities. Since 1983 the level of State grants to local authorities has increased by 33.33 per cent from £600 million in 1983 to £800 million in 1987. Such a level of increase in State grants exceeds the rate of inflation for the period by a very substantial margin. The reality is that the source of this local authority funding, the Exchequer in this instance, has been getting deeper and deeper into debt in continuing to sustain such a high level of funding and it would be irresponsible of the Government not to recognise that basic truth.
When the Government came into office just seven months ago we set about restoring order to the public finances, recognising that it was one of the essential factors for national recovery. We felt, as did everybody, that there would have to be reductions in public expenditure and that, in order to arrest the tailspin of going deeper and deeper into debt, these reductions in public expenditure would have to be substantial.
We have now published the Book of Estimates for 1988 indicating the amount the Oireachtas is being asked to provide for each Department of State. It was not a rushed exercise and it is unfair to suggest in the motion that it was. Members of the Government spent considerable time during the summer period examining every area of public expenditure and we made our decisions. Some of them were tough and harsh but we are absolutely convinced they were fair. We are united that in the national interest we are adopting the correct and sensible course of action. Any expenditure, retrenchment of savings that have been identified have been willingly handed up by every member of the Government in support of the basic effort to get the public finances back in order.
The level of Exchequer funding of local authorities will be reduced in 1988. I do not deny that, nor in any sense do I feel that I have to apologise for it. The local authorities are not being singled out to bear the brunt of the burden; it is shared by every sector and rightly so. I have been a member of a local authority for almost 21 years and I have a fairly good understanding of what local government is about. I know local authorities are faced with many demands for the extension of new services and the improvement of existing services. They would clearly desire to be in a position to provide the best and the most extensive services to the people, whether in the provision of new houses, the provision of water and sewerage facilities, the provision of libraries, or the provision of local amenities. These services cost money and it is an inescapable fact that there is only so much money available to meet all the demands.
My Department, as one of the big spenders of public money, have to take their share of the expenditure cuts. We have to be practical and we have to cut our cloth to suit our measure. The same applies to all public sector organisations, Departments, agencies and all areas where public finances are involved. I am a realist and I acknowledge that local authorities will not have an easy time in 1988. Difficult decisions will have to be made when they sit down to draw up their estimates for 1988. I have laid my cards on the table. Some time ago I told the local authorities the amount they will receive in rates support grants in 1988. I took the initiative, long before the Book of Estimates was published, and told local authorities in good time their 1988 allocation. I also deliberately brought forward the prescribed period for the preparation of their estimates.
There is the benefit to the local authorities of giving them information earlier, in that they have more time to consider how their budget for 1988 can be framed and adopted before the start of the next financial year to allow the collection of incomes to take place from the very start of the year. I consider the practice in the past of having local authorities adopt estimates at a stage when up to a quarter, and sometimes even more, of the year had already elapsed to be totally unsatisfactory. It militated against the realisation of income projected for the year and it made expenditure control difficult when already a significant portion of the year had elapsed. That practice had to be stopped.
I would like it to be recognised by everybody that it was a deliberate measure taken by me to tell local authorities in advance how much they were getting and to give them time to sit down as members of the authority with their finance officers, with their managers and among themselves to decide how best they could accommodate the services and the domestic services that they would have to provide from the money being made available to them. I invite the House to examine the various amounts that have been provided in my Department's Estimates for 1988. It will be seen that some of the provisions have in fact been increased. This gives the lie to the impression being created that everything had been chopped in an unplanned way. That is not the case. It will be seen that some of the provisions have been increased, notably the subsidy provision to assist in the servicing of capital debt. Other grants available for local authorities have been reduced by varying amounts. This only serves to further rebut the criticism that these cutbacks are indiscriminate or unplanned. I am pleased that those subsidy provisions have been maintained without change in 1988 since they relate to non-discretionary expenditure for the repayment of capital loans.
I am pleased also that the House will soon have an opportunity of discussing legislative proposals, now being considered in the other House, to provide for the elimination of the system of capital loans, whereby my Department provide subsidies towards those loan repayments, and instead to introduce a simple system of capital grant financing of these programmes. This will lead to better financial management by eliminating wasteful circular transfers of funds between the Exchequer and local authorities. I would like to think that all sides of this House would see the wisdom of that measure. I feel that you will also welcome these proposals in due course when they come before you.
Another area of expenditure by local authorities — road works — is also of special consequence. I know the particular interest that Senators, TDs and all public representatives, both at local and national level, have in so far as road exepnditure is concerned. While the reduction in the overall level of rate support grants will have an impact on the finance available for road works in 1988, I emphatically reject again the suggestion that this reduction is either unplanned or indiscriminate. At my meeting with the city and county managers on 3 September I informed them that local authority allocations for county road strengthening and a block grant for roads would be broadly at the same level in 1988 as they were in 1987 while there would be some reduction in the funding available for improvement projects. I want to point out that the county road strenghtening grant and the block grants to be allocated to each road authority will be exactly the same as in 1987. The overall provision for maintenance in 1988 is now £30 million, which represents a small increase of just £200,000 on the provision for 1987.
There have been some increases where I thought the best use and the best need and the greatest need existed for those increases. In other places there had to be reductions and on occasions there had to be terminations. The information on the block and county road strengthening grants is of particular importance to local authorities in the preparation of their estimates because these grants are generally designed to supplement expenditure from their own resources, unlike grants for national roads, which meet the full cost of the works. Local authorities have therefore had fairly firm information on both the general level of road grants and the rate of support grant since 3 September. This give them sufficient time to plan their road expenditure programme for 1988 in the areas where they have the main discretion as to spending, namely, county and regional roads. That is where the discretion is for county councillors and urban district councillors. I have given them advance notice of the money that is available and I have told them that they will not have less than they had this year. I think that is significant. I also hope to issue next month details of the actual individual allocations to local authorities. This is in contrast with other years when the first indication given to local authorities of their roads allocations was late January and often later in the year.
My decision to maintain the level of the block grant and county road strengthening grant at their 1987 level, when State expenditure on roads is generally being reduced, was influenced by my concern for employment and the state of our country and county roads. The roadworks undertaken with the assistance of these grants provide the most significant employment potential in the roads area. Most of our workforce are engaged on those type of roads and they represent about 92 per cent of the total road network. In straitened times I thought it was proper and prudent to maintain as best I can, the workforce on the road network, who service 92 per cent of the total network. That is the reason for the decision. It was planned that way.
I am satisfied that the decision which I have taken and conveyed to managers will enable local authorities to undertake a properly planned and significant programme of road works in 1988. There will, however, be a reduction in the provision for major road improvement projects on national and major urban roads, which will mean a slow down in the programme. Progress on these will be kept at as good a level as I can and, hopefully, other areas of investment in infrastructure might become available during 1988 which will allow us to take up again the major road network programmes we have become accustomed to.
Senators may be aware that I have indicated that the setting up of a national roads authority will be announced, and I will be giving details about that in the near future. They will have a job specification in regard to private investment in roads, further EC investment, the question of tolls and a whole range of related matters concerning national roads. I expect that when that is in place we can get back to providing what I regard as an essential infrastructural need: the most efficient operational structure.
There are other aspects of Government policy also which will work to the benefit of local authorities this year — but I noticed that they seemed to pass some of the speakers by without recognition. One of the principal means of reducing public expenditure is through reducing manpower levels to match the lower levels of works being undertaken. This applies particularly to local authorities. The difficulty is, however, that redundancies are costly for local authorities, particularly the lump sums which have to be paid. The Government's new voluntary redundancy package recognises these difficulties and provides that local authorities will be recouped the lump sum and severance costs involved. This will be of major benefit to local authorities in 1988. I would like Senator Doyle to appreciate that is my intention that the manual workers will not be the only ones who will have to bear the brunt of any lay-offs that become necessary. I would like to think that it would be spread across the board. That is the way it is planned by me and it is the way it is going to be implemented if I am able to do it.