asked the Minister for the Environment if he will explain the calculation of the Estimate shown for water and sewerage subsidy in 1986.
Ceisteanna—Questions. Oral Answers. - Sanitary Services Subsidy.
2.
The sanitary services subsidy requirement is affected by two main considerations — the size of the capital investment in sanitary services and the interest rates which apply. The 1986 subsidy requirement is based on the loan charges on the capital already borrowed for sanitary services in the years up to 1986, and on the loan charges on the relevant part of the extra capital which will be borrowed by local authorities for this purpose in 1986. I notified local authorities some months ago of a reduction of 3 per cent — from 13.5 per cent to 10.5 per cent — in the interest rate applicable to all local loans fund moneys borrowed since 1 November 1982 for sanitary services.
Despite this unprecedented reduction in interest rates, the subsidy provision of £45.65 million for 1986 is up 4 per cent on last year's figure and is more than double the corresponding provision for 1982. This is due to the very high level of investment in the provision of sanitary services in the past few years. The extent of the expansion which has been taking place is illustrated by the growth in capital spending on sanitary services from £195 million in the three years 1980 to 1982 to £273 million in the past three years.
The capital investment in the sanitary services area is very welcome. I initiated some of this work when I was in the Department so I am very pleased that it has been continuing. Would the Minister not agree that the figure which represents an increase, according to him of 4 per cent, though the Book of Estimates figure is about 5 per cent, would suggest an arbitrary cut in the Estimate as distinct from the figure that should be shown? The capital investment in this area in the past 12 months and in previous years would suggest a subsidy figure of the order of £5 million or £6 million more.
I would not agree. I am satisfied that the moneys being allocated this year to sanitary services will meet the needs for the programme we have set out which, as the Deputy has acknowledged, is a much expanded one. As he says rightly, he was involved to some extent in steering the programme in that direction. This year's allocation will enable the programme to be continued at its very high level. I would not agree with the Deputy's suggestion that what he refers to as a cut of £5 million is reflected in the Estimate.
Obviously we welcome the increased expenditure on the sanitary services programme in the past number of years but the question relates not to the amount of work that will be undertaken this year but directly to the subsidy that must be paid in respect of work that has been carried out up to now. We do not take into account in this respect the work of 1986 but the volume of work that has taken place in previous years. With the increased volume of work in the past number of years, I suggest that the subsidy figure as shown in the Estimate and not reflecting an arbitrary cut should be somewhere in the order of £5 million to £6 million higher on the basis of the amount of work that has been carried out in previous years.
The growth in the subsidy provision from £21.42 million in 1982 to £45.65 million in 1986, significant through it is, does not give a true picture of the extent of the progress made in the provision of public water and sewerage schemes in the past few years. The second element which affects the loan charges and, consequently the subsidy, is the rate of interest of the LLF. With effect from 1 November 1985 the interest rate chargeable on all the funds taken out for sanitary services from 1 February 1982 has been reduced by 3 per cent. The Deputy must agree that affects the amount paid in subsidy because it is decreasing the amount which could be demanded had the 13.5 per cent level remained for the current year and for a period in which the lower rate is now applicable.
Therefore, I cannot agree with the Deputy that that has not had the effect of reducing the amount of subsidy required to cover the same amount which he seems to think would be needed without any reduction but which I say is covered adequately in the Estimate.
Time will tell.
We must make more progress.