This is the second time within a short period we have spoken on local government matters. I hope it is a sign of the importance the House attaches to local government and its development. As most people will know, it is a high priority of mine as Minister for the Environment and Local Government.
This Government is less than a year in office and has already made significant progress in delivering on the commitments made in An Action Programme for the Millennium. The economy continues to grow at an unprecedented rate and unemployment is still falling. We have achieved our objective in relation to economic and monetary union and have been accepted for membership of the euro currency. We have started to deliver on the promised tax cuts. There is no one area of policy that has been left untouched. On all fronts, this Government is delivering on its promises. We are in the unique position, unthinkable in previous years, of contending with the problems of managing this phenomenal growth and success rather than struggling to achieve economic expansion, which was the major problem in the past. In a sense, the problems of success are new territory for each of us.
One specific area where investment has lagged behind, particularly over the past two decades, is local government. We have had massive capital investment projects, managed very successfully by local authorities, to build new roads, houses and that most essential service — delivering clean water. In the midst of all this investment, local authorities have not been able to maintain their ongoing services to a satisfactory level, a matter agreed by all Members of the House. Even more constrained has been their ability to get involved in developing their local communities and improving the quality of their customer care. Lack of resources has been a stranglehold around the neck of local government.
This Bill will enable me to deliver on the promises I made in relation to local government funding. Local government and the services it provides are an essential feature of our lives. However, local government should mean much more, and I am determined to see this happen.
The culmination of my abiding interest in sorting out the non-capital funding of local government is in the Bill under discussion today. When I announced my plans last January, I called it "A New Deal for Local Government". This is indeed a good and a new deal and I would like to briefly go through the major points.
The main feature of this Bill is the establishment of a local government fund. This fund will be set up from 1 January 1999 and will have nearly £600 million to be allocated to local authorities in its first year. The fund will comprise the proceeds of motor tax which will be used primarily to fund the non-national roads programme and an Exchequer contribution to fund the day to day expenditure of local authorities. In 1999, the Exchequer contribution will be £270 million which, when taken with an estimated £323 million in motor tax revenue, will see a fund of some £593 million being made available to local authorities. That is £128 million more than the corresponding funding available to them in 1997. In the event that I might be accused of misleading the Lower House where I referred to a figure of £125 million being available in this regard, the additional £3 million arose because of recently revised estimates of motor tax levels for 1998. These now amount to £323 million which illustrates one of my prime motivations for using motor taxation for this purpose, namely, the provision of a buoyant source of funding to local authorities.
The Bill provides for the ring-fencing of the local government fund for the sole use of local authorities. The fund will be buoyant not only due to the growth in the number of vehicles but also because I am providing for the Exchequer contribution to the fund to be index linked. In addition to increasing with inflation, the fund will also be modified to take account of changes to the functions of local authorities or changes in their cost base. This has been an anomaly for many years because local authorities have been expected to take on additional functions and responsibilities without any additional funding. How can we expect local authorities to implement change in areas such as environmental protection or litter control without additional money? Under the provisions of this Bill that will end. By way of practical illustration of this principle, the £270 million set aside from 1 January 1999 will increase by £300,000 because of the additional duties and functions which will be imposed on local authorities on foot of our recent announcement in respect of the protection of architectural heritage.
The money we spend in any sector of the public service must be spent wisely. After all, this money is not the property of local authorities or the Government because it is gathered by way of taxes from the public. Wherever the priorities of the day lie, we must maximise the return on the investment made. I have stated on previous occasions that there was total support from all sides of this House on the need for better value for money in all local government activities. I accept that we must be committed to quality but we must also ensure that the price we pay is reasonable and fair.
There seems to be some confusion about my commitment to value for money. This point was raised in previous debates and it was stated that I had abandoned it. Nothing could be further from the truth. I have addressed local authorities in every corner of the country in the past year and this is one of the major issues I have highlighted on many occasions. Local authorities are fully aware of my commitment to this principle. I will now deal with a number of the other features of the Bill.
Motor tax income will continue to be set aside for local government. However, in contrast with the present system of funding, it is wrong in principle to ask any sector of the public to finance the provision of general local government services for the entire community. I am, of course, referring to the Irish motorist. The Bill will now right that wrong and the proceeds of motor tax will be used primarily for the funding of the non-national road network. Motorists will see for themselves where the motor tax is being spent. I believe it is most important, in the interest of accountability and transparency, that motor tax income collected should be ploughed back into the road network thus establishing a clear link between the services received and the payment made by the customer.
Last week in the Dáil I acknowledged the previous Government's recognition of the importance of those roads and its commitment to restoring them through the roads restoration programme. The Government is totally committed to the success of the non-national roads programme and has already increased the investment from the Exchequer this year, working to ensure that the target date of 2005 will be achieved and that all non-national roads will be up to a suitable standard by that date.
Part of the package of measures to address local government funding contained in the Bill is the increase in motor tax rates. The rate increases of 3 per cent this year and a further 3 per cent from 1 January 1999 are minimal when it is considered that these are the first increases since 1992. For a car under 1,000 cc, the increase will be £3 this year on the annual rate or £6 when the rate increases for next year also come into effect. These changes are hardly significant when one considers the full cost of motoring.
However, as I said before, this is more than a series of rate changes to fund non-national roads. It is also a reform measure and a major shift in motor tax policy. Not all the rate changes proposed are increases, and the Bill recognises the importance of adequate public transport facilities to society by cutting the motor tax rates for buses drastically. The greening of taxation is happening in many countries in Europe and will continue to evolve in Ireland. This reduction in public service vehicle motor tax rates is a move in that direction.
Another myth that has appeared recently, and one that was articulated by Senators the last time this issue was discussed, is that if I abolish the local government equalisation fund I am forgetting about equalisation. That is without foundation. The principle of equalisation will be a core feature of the local government fund. It is most important that any additional funds that become available are distributed equitably. However, to do that we must know the needs of local authorities, the resources they have to cater for them and consequently the resources they would need from other sources.
Most Senators are aware of the dissatisfaction in local authorities about the way in which the old rate support grant system worked. It was not fine tuned to respond to a changing society. The services being provided may have changed but the funding did not. The additional funding is substantial and for that reason equalisation has become much more important.
That is why I am funding a pilot study by Galway County Council on its needs and resources, and those of the other local authorities in Galway, with a view to developing a model that can be applied to any local authority. The study got under way in March and I hope to see the results emerging later this year. We must achieve a model where various criteria are identified which contribute to higher or lower costs and where the capacity of a local authority to raise funds locally is factored into the equation. The intention is to find a level of funding appropriate for each local authority and then to allow that local authority the maximum independence possible in delivering its services, whether they are discretionary or statutory services.
There is a number of other aspects to the Bill which are not related to funding. The first provides for the postponement of local elections from June of this year to June 1999. I wish to reiterate my statement in the other House that the decision to postpone them was not taken lightly by the Government. Local elections are the principal means by which the political will of the local community is expressed. It is now almost four years since the people spoke at town elections and almost seven in the case of city and county authorities. Ordinarily, therefore, the case for local elections in June of this year would be very strong. However, these are not ordinary times for local government; there are substantial and unique arguments why the elections should be postponed for another 12 months.
The first of these is that a major programme of local government renewal spanning a number of years is now underway. I know this has been used in the past to postpone local elections without being followed through. However, I am absolutely committed to delivering a new local government system and it is important that the general outline of that new system should be known before the electorate casts its vote next year and selects who is best suited to represent it.
Few would deny that local government needs to be made more attractive to a wider range of people, particularly women and the young. The prospect of a vibrant and reinvigorated local government system should help to provide broader participation.
A review of the electoral areas, taking account of the 1996 census results, is needed due to population changes since the last review 13 years ago in 1985. I have established committees to review local electoral areas and to report by 1 July next. It is important that whatever revisions are needed should be known by the electorate and potential candidates before the election takes place.
The recent establishment of the strategic policy committees system, which will strengthen and widen local democracy, is now well underway, representing the most radical development in local government for decades. It is important that that system is given the chance to settle in before elections are held.
The reasons for this short postponement are, therefore, very strong. It will allow the building blocks of the local government renewal programme to be put in place or, at least, be known before the electorate decides who should represent it at this crucial time of change.
The second aspect of the Bill, which is unrelated to funding, concerns local authority recruitment procedures. There is currently a statutory requirement that every permanent local authority office for which a professional qualification is required must be filled by the Local Appointments Commissioners. The inflexible nature of this requirement has prevented a solution being found for the plight of professionals in general, and engineers in particular, who are being retained in temporary employment on a long term basis by local authorities. Such is the length of service of many of these people at this stage that they should in equity be made permanent. That has not been possible up to now, but this amendment to the 1926 Act will remove the statutory barrier and provide the flexibility to allow the position of these people to be regularised.
No decisions have yet been made on precisely which posts will in future be designated for filling through the LAC. However, the intention is that the resources of the LAC will in future be devoted more to the selection and recruitment of the senior tiers of local authority posts. The more junior professional posts will be filled by way of local competition, as is the case with the clerical and administrative grades.
Due to concerns expressed by Deputies on this issue in the other House, I gave a commitment to keep the Oireachtas informed by ensuring that decisions are made by order of the Minister and that such orders will be laid before the Houses of the Oireachtas within 21 days of being made. I also gave commitments in the other House in relation to the levels and grades above which the Local Appointments Commission will continue to make appointments.
A section of the Bill provides for the making of a scheme to enable the payment of a gratuity on a once off basis to councillors who retire before the next local elections. I signalled my intention to introduce such an amendment to the Bill when local government was discussed in the House recently. The purpose of the gratuity is twofold. First, it seeks to recognise in a positive way the generous service that has been given by councillors over the years. Second, assuming a proportion of councillors take up the offer of a gratuity, it will create openings in the local government system for newcomers.
I hope the political parties will seek out and encourage potential candidates from a broad range of society, particularly women and young people. However, in case I am misunderstood, I do not wish local government to lose all its elder statesmen with all their experience and knowledge.