The origins of this Bill were established with the passing in the Dáil on 25 November last of a financial resolution which essentially amended the Finance (Excise Duties) (Vehicles) Act 1952 and the Finance No. 2 Act 1992 on rates of motor taxation and trade plate licences. The resolution has, however, only a limited life and to continue in effect it needs to be replaced by an Act of the Oireachtas, which provides it with a permanent legal basis.
The primary purpose of this Bill is to give a permanent legislative basis to the new motor tax rates set out in the resolution. These rates apply to tax discs taken out for periods commencing on or after 1 January 2004. The new rates, therefore, have already been in place since the beginning of the year and no increases over and above these rates are provided for in the Bill. A standard across the board increase of 5% has been applied to the old rates.
The primary consideration in making the decision to increase motor tax rates was the need to provide adequate funding for the non-national roads programme. In this regard, it is important to underline the fact that all of the estimated extra revenue generated by the increases in rates will be spent on non-national roads.
Unlike other taxes, motor tax is not paid into the Exchequer but instead is paid directly into the local government fund established under the Local Government Act 1998. The money in the fund is ring-fenced specifically for local government. This means it can only be spent on local government and cannot be dipped into and used by the Exchequer for other purposes. To underline the independence of the fund of the Exchequer, the Department maintains the fund bank account in a local bank close to the Custom House. In addition to motor taxation, the fund is augmented by an annual contribution from the Exchequer. The fund is used primarily for two purposes: first, to finance non-national road grants to local authorities and, second, to finance the general purpose block grants allocated to local authorities each year to assist them in their day to day current expenditure.
With the additional motor tax revenue which will accrue to the local government fund as a result of the 5% increase provided for in this Bill, combined with a significant additional Exchequer contribution to the fund, we have been able to increase the amount available in general purpose grants to local authorities in 2004 and to increase the amount of funding for non-national roads to record levels. What this means in money terms is that the 2004 general purpose grants funding package is €752 million, an increase of €92.2 million on last year. Since 1997 the level of general purpose grant aid to local authorities has increased on average by 122%, which represents an average annual increase of some 17% over the past seven years. This year's allocation for non-national roads is €477 million, which is more than double the 1997 expenditure. It is almost 10% more than last year's expenditure and the highest in the history of the State.
This allocation of €477 million for non-national roads is made up of €428 million from the local government fund and €48.8 million from the Exchequer. The 2004 Exchequer allocation shows an increase of approximately €8.8 million or 22% over the initial 2003 provision. This increase in the Exchequer provision will provide funding towards the increased costs of key strategic non-national road projects, which will assist housing, commercial and industrial development. The additional funds being provided in 2004 will enable local authorities to progress work on these critically important schemes situated on the country's regional roads network.
The channelling of motor tax receipts into the local government fund and the use of this fund for non-national road grants has created an important link between the amount of tax paid by motorists and the service they get for that tax in terms of better roads. I hope the House will acknowledge that the motoring public is seeing the benefits of this spending on non-national roads. More work remains to be done, but an objective assessment would show that we have made huge strides in upgrading our non-national roads during the past seven years or so.
The national development plan provides for investment of €2.43 billion in the non-national road network from 2000 to 2006. This is a significant amount of money and I am especially pleased to see it is being spent well. As I mentioned in the Dáil recently, the non-national roads programme is one of the major success stories of the NDP. It continues to be one of the best performing measures under both the south and east and BMW regional operational programmes. As the continuation of this work by local authorities is dependent on adequate resources, we are increasing the rates of motor tax and trade plate licences. The proposed 5% increase in motor tax rates will raise some €34 million extra for the fund and the entire sum will be invested directly in our non-national road network.
Last year, RPS-MCOS Limited, consulting engineers, was appointed to carry out the second ever pavement condition study on non-national roads. The study is combined with a review of pavement management systems. The study forms part of the Government's ongoing commitment to restoring the network of regional and county roads to a satisfactory condition over the ten year period from 1996 to 2005. Its results will determine what progress has been made since 1996 and record the extent of remaining deficiencies in the non-national road network. The results will also inform the prioritisation of investment in the non-national road network over the coming years and help to ensure value for money. On completion of the study, local authorities will be asked to examine and submit revised multi-annual restoration programmes for 2005 onwards.
The review of pavement management systems is a first. The consultants have been asked to review existing systems and recommend a single mechanism for use by local authorities on the non-national road network. This process is intended to assist local authorities in prioritising schemes for inclusion in the restoration programme. The study and review are due to be completed by August 2004.
As I indicated at the outset, standard increases of 5% are being applied to the old rates of motor tax. The new rates for all vehicles are set out in the Schedule to the Bill. Rather than take up the valuable time of the House by listing each and every new tax rate, I will make better use of our time by highlighting just a few details of what the proposed changes will mean in money terms for the private cars and goods vehicles which make up 91% of the national fleet. For the smallest private car engine size, which is under 1000cc, the annual rate increase is €7. For cars in the 1001cc to 1300cc range, the annual increase is between €11 and €13 while for cars in the 1301cc to 1400cc range, the additional annual increase is €14. As 60% of the national car fleet consists of cars under 1400cc, the extra costs for most motorists will be between €7 and €14 a year or 13 cent and 27 cent a week. For the remaining cars, the increases will range from €15 for cars above 1400cc to €64 for cars over 3001cc. Less than 0.5% of cars in the national fleet are in the 3001cc plus category.
As with private cars, the effect of the 5% increase on goods vehicles will vary depending on size. Where the rate for a private car will depend on the cubic capacity of the engine, the rate for a goods vehicle will be based on its unladen weight. Some 85% of goods vehicles qualify for the lowest level of charge and will pay an annual increase of €12 per annum or 23 cent per week. A 5% increase also applies to trade licences which are also known as trade plates. As the House may be aware, these are the green registration plates used by motor traders in lieu of taxation on vehicles which are temporarily in their possession. While there are strict restrictions on the use of such plates, they are transferable between vehicles. The increase for a pair of trade plates will be €13.
This is a short Bill. Its purpose is simply to give permanent, legal effect to the changes in motor tax rates and trade plate licences. These increases are being introduced with the single purpose of funding the non-national road programme to ensure that local authorities can continue the great progress which has been made in rehabilitating our non-national road network. The legislation is worthy of support from all sides of this House.