I thank Senator Murnane O'Connor for her comments and am delighted to see her fighting for her area. As Minister of State with responsibility for business and trade, I am always concerned about balanced regional development. I was in Carlow earlier this year and was very impressed with Carlow Institute of Technology and the innovation centre. The county is lucky to have a third level institution and its innovation, as it attracts entrepreneurs. I have no doubt that Carlow has a bright future, given its location. I would talk up Carlow rather than talk it down as it has much to offer and is a very nice town.
I apologise for the absence of the Minister, Deputy Eoghan Murphy, and the Minister of State, Deputy John Paul Phelan, as both are tied up with budget issues. They asked me to take this matter this morning. I thank the Senator for raising the matter.
I welcome this opportunity, on behalf of the Minister of State, Deputy Phelan, to outline the importance of equalisation funding to local authorities such as Carlow County Council in the context of local property tax, LPT, allocations. It is important to recall that the LPT was introduced to provide a stable and sustainable funding base for the local government sector, providing a greater level of connection between local revenue-raising and local expenditure decisions, while simultaneously reducing the local government sector's reliance on other taxes. Local retention of the LPT started in 2015 and since then the overall principles and allocation mechanisms have broadly remained the same. A total of 80% of the LPT is retained in the area in which it is collected, notwithstanding any local variation decisions. The other 20% goes to support equalisation funding for local authorities with lower LPT bases, just like the Senator's county council in Carlow.
As we all know, local authorities vary significantly from one another in terms of size, population, public service demands, infrastructure etc. In the past, general purpose grant funding and other income reflected this variety. It is not possible, therefore, to compare absolute levels of funding received across local authority areas, as to do so would not reflect the differences between them.
With regard to the LPT, in accordance with decisions taken by Government regarding the distribution of funding, every local authority has a minimum level of funding available to it known as its baseline. Equalisation is the process that ensures that every local authority’s LPT allocation is brought up to this baseline. As well as the 20% contribution from each local authority, the Exchequer also contributes to equalisation support, with €43 million allocated in 2018 and to be distributed in 2018 in accordance with the LPT allocation mechanism. The current baseline is linked to previous general purpose grants and was increased in 2016 to take account of pension-related deductions previously retained as an income stream by local authorities. For both 2017 and 2018, the Government decided that no local authority should receive less income from the LPT than it received in the form of general purpose grants in 2014 as well as the amount of pension-related deductions that was integrated into the baseline in 2016.
Accordingly, Carlow’s LPT allocation is in line with its previous funding level, as is the case for all local authorities. In fact, Carlow County Council is a net beneficiary of equalisation. For 2018, the estimated LPT yield in Carlow, based on data from the Revenue Commissioners, is €3.9 million, of which €794,000, 20%, goes towards equalisation. This contrasts with a baseline figure of €6.1 million, meaning in 2018, Carlow will benefit by €2.9 million from equalisation support. If this is the figure to which the Senator is referring, it is important to remember that the same mechanism has been applied consistently across the local government sector, that LPT allocations for 2018 have been finalised and notified to authorities and that it is not possible to reopen this decision or to supplement the allocation of any individual authority.
The current approach to LPT distribution and equalisation is fair, consistent and ensures resources are used to support those authorities that need them most. It is important that local authorities are treated in a consistent manner. Any variation from that approach for one individual local authority would introduce inequity and, it is presumed, lead to similar demands from other local authorities. All such issues have to be considered within the parameters of the national and fiscal budgetary situation and the competing priorities presenting themselves at the wider governmental level.
In this context, it should be noted that the Government has allocated significant resources to tackling the housing shortage as part of the budgetary process. The Senator will be aware of the €1.83 billion allocated for that in the budget. The Department of Housing, Planning and Local Government will continue to work with local authorities to deal with this issue.
It is a matter for each local authority to consider how it can maximise local income sources and manage its own spending in the context of the annual budgetary process. As the process of formulating local authority budgets ramps up in the aftermath of the national budget, local authorities must consider how to balance income with service delivery. The current local government funding model supports local authorities of all types to support an appropriate level of service provision. Every local authority has the opportunity to decide whether to increase or decrease LPT rates by up to 15% each year. Carlow County Council did not use its power to vary LPT rates for 2018, nor did it use those powers in the past. If the authority had decided to increase LPT rates, it would have retained 100% of the additional LPT collected and would, therefore, have had additional funding available for the county. It is important to note in this context that budgetary decisions, a reserved function, are a key responsibility of the elected members of local authorities. As well as LPT and grants from Government, local authorities also derive income from local sources, including commercial rates, and goods and services. These two sources account for almost 65% of Carlow’s budgeted income for 2017.
The Department keeps the LPT allocation mechanism under review to ensure equitable treatment of all local authorities. However, while acknowledging that local authorities may face challenging decisions in the coming weeks in the context of their annual budgets, no additional LPT funding can be made available to any authority.
I thank the Senator for raising this issue. I know she has grave concerns about it. There is very little we can do about the allocation for this year and it may be something that could be considered for next year.