Local authorities’ cost and income bases vary significantly from one another as a result of their size, population, public service demands, infrastructure and income sources. It is clear that there are significant variances in their abilities to raise revenue locally and they therefore require appropriate levels of financial support.
The Needs and Resources Model was developed in 2000 to assist in the determination of a portion of the allocation of General Purpose Grants (GPGs) to local authorities from the Local Government Fund (LGF). The aim of the model was to bring about equalisation between local authorities over time so that each would have sufficient resources, from a combination of central grants and local income, to provide a reasonable level of services to their customers. The principle of equalisation has remained in the allocation mechanism from the days of the Needs and Resources model to the present.
The model was used each year until 2007. A considerable amount of data was analysed to arrive at a proposed distribution, with up to 600 financial entries in each return. Local authorities provided detailed annual returns for the model and this action proved overly time consuming and cumbersome. The Model was first used to assist in determining a portion of the general purpose grant allocations from the LGF in 2000, based on detailed annual returns from local authorities, and was subsequently used each year until 2007.
From 2008 on, GPG allocations were determined, for the most part, on the basis of historic baseline supports with necessary year on year adjustments determined by the overall amount of funding available. In allocating GPGs, regard was given to each local authority’s income and expenditure, the overall amount of funding available for allocation and the need to provide each local authority with a baseline allocation that would ensure its financial stability.
Given the reduction in GPG allocations from a historic high of €999m in 2008 to €640.9m in 2013, the practice was to provide for an across the board adjustment and then some individual adjustments to take account of specific issues in the coming year.
2014 was the final year of GPG allocations. The 2014 GPG allocations also recognised the move of water related costs from local authorities to Irish Water in 2014. Accordingly, 2014 GPG allocations are not directly comparable to previous years.
2015 saw the introduction of Local Property Tax (LPT) allocations being paid to local authorities. The Government decided that no local authority would receive less income from LPT in 2015 and 2016 than it received from its GPG allocation in 2014. Accordingly, the LPT allocations for 2015 and 2016 took account of the historical GPG funding provided to any former borough or town councils within the local authority area. For 2017 onwards, the LPT baseline of each local authority was increased to include an additional amount equivalent to the Pension Related Deduction income retained by local authorities in 2014.
In May 2018, a Local Government Funding (Baseline) Review Group was established. The role of the group was to consider the methodology used to determine local authority funding baselines, so as to inform the distribution of any additional available funding for general, operational purposes.
The review group was tasked with, insofar as possible, developing a methodology for distributing the available funding to bring greater balance and equity of funding outcomes for local authorities, in the context of the wide range of issues they face and the diverse nature of local authority areas across Ireland.
The recommendations of the review group are currently under consideration.
