The hopes and ambitions of local authority members based on their newly found status as real public representatives have been crushed by this short sighted Minister. If he carries out his threat it will be a mistaken instruction, to paraphrase a former leader of his party.
The last Government was one of achievement. When it took office it set itself a number of key objectives for economic and social development, all of which were achieved. One of the primary objectives was to develop an economy which would be the envy of Europe and this was achieved. We left office with an economy which could meet the challenge of international competition and with a system which shared the fruits of efforts, initiatives and success. The previous Government can be proud of its achievements in that area.
The new Government has inherited a country that is the envy of Europe with low inflation and interest rates which, with proper management, are destined to remain low. The number of people at work is at an all time high and continues to grow while the national debt continues to fall. Indications are that economic growth will continue into the next century provided there is proper management of the economy. The last Government realised, however, that a strong economy is only one parameter by which a country is judged. It knew that in order to achieve balanced economic development nationwide there was a need for strong local government and to promote social services, such as health and education and it has an impressive record in these areas. For example, it promised that public housing would increase to 7,000 units annually. A sum of £400 million was spent on the social housing programme in 1997. This represents an increase of almost 10 per cent over 1996 and will allow the realisation of its commitment this year.
The previous Government has also achieved important targets in the area of the environment. The Government of renewal policy document set parameters in regard to the preparation of a national sustainable development strategy to address all areas of Government policy which impact on the environment. These were met on leaving office. It also introduced major legislation on waste management. I compliment my colleague, Deputy Howlin, for his work in office. In the document three specific commitments were given on local government finance. One was to limit the powers of local authorities to disconnect domestic supplies for non-payment of service charges. The second was to grant a tax allowance at the standard rate up to a maximum of £150 in respect of service charges paid in full and on time. This was implemented in the Finance Act, 1995. The third commitment was to commission a professional study on local government funding to see how a fair, equitable and reasonable system of funding could be introduced. One of the key achievements of that Government was that these commitments were met in just over two years.
In December 1996 the Government launched a major new programme entitled Better Local Government — A Programme for Change. It set out a series of policy decisions for the reform of local government. It was, and still is, the most important local government reform measure in decades. Its key objective was to build a new local government structure which was stronger, sharper, more powerful and independent. The setting up of a proper system of funding for local authorities was at the core of the strategy because up until then they did not have the financial resources to meet the needs of their consumers. Therefore, the initiatives regarding local government were meaningless. In publishing this major new programme, the Government recognised the vital role the local government sector had in assisting economic growth and in promoting social well-being and cohesion of society because it was aware of the extent to which local government touched the day-to-day life of many people.
Local government has developed significantly in recent years with an annual expenditure of £2 billion and a staff of more than 30,000. However, there were major questions — was it operating efficiently and effectively and was it meeting the demands of the late 20th and early 21st centuries? The document was published against the backdrop of serious financial difficulties faced by many local authorities with the level and quality of services being pared back to the bone. In many cases services had been discontinued. I recount the experiences of my local authority in Cork where year in year out members and management were at their wit's end as they attempted to bring together different programmes and live within their budget. One could see in recent years that many services in the Cork area were run down and some had been discontinued.
The decline in the role of the local authorities had come about for a number of reasons: the abolition of domestic rates in 1977 had brought about a situation where their financial base had become too narrow, new functions were being conferred on local authorities by central Government without sufficient resources being made available to carry out those functions and local authorities were almost totally dependent on decisions of Government for financial resources, never being certain of how much rate support grant they would receive from year to year. This uncertainty demoralised local authorities and resulted in some being bankrupt. Because of the serious situation of local authorities, the Government knew immediate action was required.
In the programme, a Government of Renewal, a commitment was given to carry out a professional study of local government's funding to see how the Government could introduce a fair, equitable and reasonable system of funding. The Government appointed KPMG Management Consultants in 1995 to carry out this major work which involved extensive consultation with officials with the Departments of the Environment and Finance and representatives of local government throughout the country. As well as this work the consultants carried out a detailed analysis of local authorities' existing and future funding requirements. They evaluated the effectiveness of the existing system to meet these requirements and also a wide range of funding options was examined by the consultants, including a local property tax, a local income tax, a local sales tax, a poll tax, a system based on Government grants, charges for services and a system based on assigning some existing taxation to local authorities. All the options looked at had advantages and disadvantages but the decision arrived at was that there was no perfect way to fund local government which would be acceptable to everybody.
However, the Government announced its decision and brought legislation before the Oireachtas. The legislation provided local authorities with their own viable source of finance to allow them to effectively carry out the range of functions required as we approach the end of the 20th century.
The Local Government (Financial Provisions) Bill, 1997, provided for a new system of funding for local authorities under which the power to levy domestic water and service charges was abolished, the rate support grant was terminated and the income from those three sources was replaced by assigning the proceeds of motor tax to local authorities which would allow them a more buoyant and a larger amount of finances than the three abolished incomes.
With these new powers the legislation ensured the best possible use was made of the resources provided to local authorities and that greater priority would be given to efficiency, effectiveness and economy. The rate support grant was terminated with effect from 1 January 1997 with an interim arrangement continuing until the legislation was enacted. This new income was to give local authorities full and sole ownership of the entire proceeds of a single tax which was being ring fenced to prevent interference from central Government which resulted in a direct financial relationship being established between local authorities and the electorate. What was happening did not involve any new form of taxation but a change of arrangements in relation to an existing tax which, instead of being transferred from local areas to the Department of Finance, was being collected and spent locally.
These new powers for the local authorities to raise and spend money locally ensured local authorities would not have the serious financial and administrative problems experienced up to recently. Given that the motor tax source of income was seen as buoyant, especially between 1991-95 when the vehicle fleet in Ireland increased by 14 per cent and 1996 was a successful year for car sales, that success is destined to continue into 1997 and beyond. Local authorities were being guaranteed financial viability because, based on the 1996 Book of Estimates, the income from motor tax for that year exceeded the combined income from domestic water and sewerage charges and the rate support grant from central Government by approximately £12 million. This allowed local authorities to participate in the current economic boom and to expand their role in their communities. Local authorities were already collecting the tax on behalf of central Government and it was providing them with their own buoyant and locally collected source of income which was independent and protected by legislation. This gave local authorities greater competence and the ability to plan and develop their services from a basis of financial stability and independence which they had sought for many years.
The equalisation fund was aimed at ensuring that local authorities would benefit from the legislative changes. The Government guaranteed the independence of the process by providing in the legislation that a local government equalisation council would be set up to manage and decide allocation of payments from the equalisation fund. It proposed also that the equalisation council be established as quickly as possible to allocate money on the basis of ensuring that everybody gained from the new arrangement. This would be done by a mechanism separate from the Departments of the Environment and Finance through a process under which local authority officials, representatives of the General Council of County Councils, municipal authorities and management would make decisions about payments from the equalisation fund in accordance with the need and merit of each authority as well as funding initiatives within the overall local government system.
The principle of local discretion is important for the concept and practice of local democracy. It was important that local authorities have a measure of discretion over their own funds and be able to apply the income generated directly to the improvement of local facilities such as roads. The ability they were being given to vary the rate was important, enabling local authorities to respond to circumstances in their own area and be ultimately judged by the people of their area on their stewardship and performance.
The proposals now in law allow national rates of motor tax to be set centrally while at the same time empowering local authorities to increase the national rates of taxation on cars and motorcycles to 6 per cent, subject to a maximum of 3 per cent in 1998. The 6 per cent was a limit to the increase above the national rate. The legislation also allowed consultation between county councils and urban district councils and between individual local authorities where one collects on behalf of the other on foot of an agreement in relation to the extent of any variation in rates. The addition of a local variation element struck a balance between the need to give a measure of autonomy to local authorities and the requirement not to impose any significant new forms of taxation.
The question of local government funding was but one of a number of major reform measures contained in the document on better local government. In his press statement last week the Minister for the Environment, Deputy Dempsey, spoke about efficiency and effectiveness as though they were never thought of before. Part of the reform measures involved encouraging local authorities to improve the manner in which they operate. In particular, local authorities were to have greater regard to the important principles of efficiency, effectiveness and economy in their day-to-day activities. It was important that local authorities be provided with the resources to do the job properly and that they be seen to make the best use of resources on a sound businesslike basis.
The legislation put forward by Government and passed by the Houses of the Oireachtas earlier this year had a second major objective, the putting in place of a series of measures designed to ensure that local government should realise the best return from the proposed new funding scheme.
The Minister spoke about the need to introduce performance indicators which would allow members of the public to compare how well their local authority was performing compared with others. The legislation passed by the last Government had already dealt with this matter. Section 14 of the legislation formally established a value-for-money unit within the Department of the Environment on a legal basis and provided for its role and function. In keeping with the spirit of openness in the document on better local government, the value-for-money unit would have been obliged to publish full details of the result of its work. Section 15 of the legislation provided that in addition to the normal regulatory audits local authorities would be subject to value-for-money audits similar to those being carried out by the Comptroller and Auditor General. The value-for-money unit was earmarked to undertake a more comprehensive and in depth analysis of a wide range of local government activities which would assist local authorities with the use of resources in the delivery of their services and improve the manner in which they were managed generally.
The last Government introduced comprehensive and well thought out legislation relevant to the needs and objectives of local authorities. It provided local authorities with a source of finance which allowed them to properly undertake the range of functions for which they were responsible while at the same time requiring them to make the best possible use of the additional resources being made available to them. Its underlying principle was that resources and accountability must compliment each other if taxpayers are to be satisfied that the best return is being got from their taxes.
The initiative taken by the previous Government was historic in that for the first time in decades it gave local authorities a solid financial basis to enable them to realise their true potential and to meet the requirements of the public as we approach the next millennium. It gave them a new independence and autonomy which is now under threat because of the Minister's statement that he has already given instructions to set in train the necessary changes in legislation on local government funding and that he will terminate the existing arrangements as soon as possible. Will the Minister outline his position on this tonight? If it is true he intends terminating arrangements this is a black day for local authority management, its members and the public and represents a major U-turn on the principle of the devolution of power that will put local authorities, their management and members under the solid thumb of the Minister and the Department of the Environment. I wonder if this is the only decision of the previous Government that will be reversed. Will the Minister give a cast iron assurance tonight that he will not reintroduce water charges this year or in the foreseeable future and that he will not succumb to pressures from other sources in Government to introduce a system of water metering, as proposed by the Tánaiste prior to the general election?
