Dáil Éireann Debate, Tuesday - 21 January 2014
480. Deputy Barry Cowen asked the Minister for the Environment, Community and Local Government the reasons behind retaining local property tax proceeds to fund Irish Water rather than allowing local authorities retain 80% of locally raised funds; the total sum held back by the Government; where that sum will be spent; if unused, will the remaining funds be distributed on the original basis; and if he will make a statement on the matter. [2850/14]
View answer494. Deputy Barry Cowen asked the Minister for the Environment, Community and Local Government the total amount from the Local Government Fund planned to be invested in Irish Water service level agreements in 2014 and subsequently; and if he will make a statement on the matter. [2944/14]
View answerI propose to take Questions Nos. 480 and 494 together.
The local government funding model is changing considerably in 2014. Under the Finance (Local Property Tax) Act 2012, commencing this year, the Minister for Finance will pay into the Local Government Fund an amount equivalent to the Local Property Tax paid into the Central Fund during that year; this revenue will be allocated to local authorities from the Fund, as General Purpose Grants. In addition, the establishment of Irish Water and its financial relationship with the local government sector has a considerable impact on local authority financing.
The Government has indicated an intention to move to 80% retention of all Local Property Tax receipts within the local authority area where the Tax is raised. The establishment of Irish Water presents local government with significant organisational and financial challenges in 2014. Service provision responsibilities are moving from the local authorities to Irish Water, infrastructure is being transferred, financing arrangements have altered and local authorities are operating on behalf of Irish Water under Service Level Agreements. These changes must be managed.
In this context, it has been necessary to defer defining a certain proportion of the proceeds of the Local Property Tax to be retained in each local authority until 2015. This approach allowed maximum flexibility in allocating Local Property Tax in 2014 in the form of General Purpose Grants, with a priority to support those local authorities with weaker funding bases. In allocating general purpose funding for 2014 I have sought to ensure, in combination with the funding being made available through Irish Water, that these elements of support for local authorities would be maintained around 2013 levels. It will be a matter for each local authority to determine how best to use General Purpose Grant revenue in line with local priorities and circumstances.
The Revised Estimates Volume for Public Services 2014 provides an amount of €490m for Irish Water from the Local Government Fund in 2014 ; the final outturn figure for 2014 is likely to be slightly less than this amount. This amount provided will fund water related expenditures incurred heretofore by local authorities ; these expenditures were previously met by local authorities from their own resources and general purpose grants.
I expect the Local Property Tax to have multiple benefits, including a more sustainable and resilient system of funding for local authorities and therefore a sounder financial footing for the provision of essential local services; greater local scope for financial decision-making concerning service provision - in particular, the inclusion of the local variation mechanism from 2015 will further increase the autonomy of local authorities; and a strengthening of democracy at local level with a more active relationship between local authorities and local electorates. A stronger democratic relationship and clearer lines of accountability can only have a beneficial impact on service provision from the perspective of the service user.
