Noel Dempsey
Ceist:23 Mr. Dempsey asked the Minister for the Environment if he will give details of the proposed system of equalisation in the new arrangements for local government. [1788/97]
Priority Questions - Local Government Arrangements.
The new system of local funding is based on assigning the proceeds of motor taxation to local authorities. The amount of this taxation collected by the different authorities will vary, in some cases significantly, from the income levels generated by the existing system — some authorities will collect considerably more and others considerably less. This requires a transfer of resources to ensure — as has been stated very clearly in the programme — that every local authority benefits from the changes.
Under the proposed equalisation system local authorities will retain 80 per cent of the proceeds of motor tax on non-goods vehicles and contribute all other motor tax revenues to a fund for redistribution. The resources of the fund will be distributed in the first instance to ensure that the income lost through the abolition of domestic water and sewerage charges and the rate support grant is made good in full to each local authority. The balance remaining will be allocated as equitably as possible among local authorities, having regard to needs and resources. Work has already commenced in my Department on developing a more finely tuned and comprehensive equalisation mechanism for 1998 and subsequent years. This will be provided for in legislation which will come before the House in the next two months or so.
Irrespective of the form of financing used for local authorities, I agree with the Minister that it should include the principle of equalisation. The Minister in his reply has not given any further detail than that which was available before Christmas. Given that local authorities had to make returns before the end of December, will the Minister confirm if calculations have been carried out in the Department?
Will he also confirm if practically every county will get money from the equalisation fund and, if so, how many counties will be net contributors to that fund? Is it true that the county councils in Dublin will be the only net contributors to that fund? Figures from a survey I carried out of eight to ten counties reveal that councils in those counties are of the view that they will get a sum ranging from £1.5 million to £2.5 million from the fund.
I confirm that the majority of counties and authorities will receive support from the equalisation fund. I welcome the Deputy's support for the concept of the fund which is largely based on work on health insurance I did previously when the Deputy and I were in Government. We looked at equalisation funds that operated effectively in the health insurance area.
A much more constructive way of looking at this is that nobody will be worse off and that every local authority in the country will be better off. The mechanism that will operate from this year will be that the Minister for Finance will indicate in his Budget Statement the arrangements for rates support grants. That will tide all local authorities over until such time as we enact the legislation to transfer formally and legally by statute, although it is accruing to them from 1 January, the proceeds of motor tax to local authorities. Eighty per cent of revenue from motor car tax, motor cycle tax and small revenues, such as licence fees and so on, will accrue to local authorities and 20 per cent of that revenue, together with that accruing from commercial vehicle tax, will go into the equalisation fund. We will have a substantial pool of money in that fund to redistribute. The simple mathematics of this is that the pool will be significantly bigger than the combination of rates support grant and service charges, which are being abolished, so there will be buoyancy. Two important principles to bear in mind are that this will be the first time in the history of the State that local authorities will have ringfenced funding available to them by statute for ever more and, second, it will be one of the most buoyant sources of revenue that we will have. It is a major achievement for the Government to give to local government that guaranteed source of income buoyancy into the future.
Interesting statistics I read in a newspaper reveal that in the first ten days of this year there was an 11 per cent increase in registrations over the very buoyancy equivalent period last year. Local authorities will have a good source of income from this day on.
An important fact to reiterate is that I have told local authorities we will continue to support the very high rate of commitment on the other funds they receive directly from the Department of the Environment in the area of housing for which my colleague, the Minister of State, has responsibility, and road grants. All Members of the House have recognised and appreciated the historic level of non-national road grants I announced earlier this week.
Am I correct in assuming that a formula for the distribution of the equalisation grant has not yet been worked out by the Department? Will the Minister confirm that this year he will ensure no one will be worse off and that in future years it will be the Department's intention that an objective formula will be drafted which will take into account the state of development of the county, local authorities, the population, infrastructural needs and so on? Will he further confirm that the formula will be reasonably objective in so far as it is possible in such matters in that it will not be distributed at the whim of the Minister in the Department of the Environment where large sums of money could be allocated in one direction to the detriment of others? Is such a formula in place or being worked on or is it the Minister's intention that it will be in place for 1998?
Objectivity depends on one's perspective and if one takes anything from anyone objectively, that is a damage. I confirm largely what the Deputy said. We started the process this year, but we will not have the detailed analysis of the functions, capacity, population distribution of each local authority that ultimately we will need to have an absolutely crystal clear and fair equalisation. The starting point this year will be to ensure that nobody will lose out and that everybody will be better off. The second step will be to share out as equitably as possible the benefits of the buoyancy I mentioned. Then we want to fine tune the criteria the Deputy mentioned. We have undertaken a survey to get fundamental data on population distribution, infrastructure support required and so on so that we can give a better distribution than the rates support grant, which was a rather crude system, did up to now.
We can tease this out when I introduce the legislation in about two months' time. I would see the equalisation fund being administered separately from my Department ultimately and the local authorities being represented on the management of that fund so that its distribution would be clearly objective and not at the whim of a Minister for the Environment or, much more worryingly, a future Minister for Finance, who might see it as a fund to be used lightly. We must establish it in a way to ensure it is protected from any predatory Minister for Finance, who certainly would not come from this side of the House. One does not know who might be in power in a decade or so.