Having reasonable means of raising revenue is essential to a healthy system of local democratic government. The decision to abolish domestic rates in 1978 and the consequential decisions have had in my view detrimental effects on both the health and the financial stability of the local government system. The time has come to redress this situation and to restore to local authorities a measure of financial independence.
The Local Government (Financial Provisions) Act, 1978 provided in effect for the abolition of domestic rates and for recoupment by the Minister to the local authorities of the relevant allowances made by them in respect of such rates. The Act conferred power on the Minister to place limits on the amounts by which local rate poundages would be permitted to rise: It also provided for estimates adopted by councils to be reduced if the rate determined was in excess of the prescribed limit.
Under this legal and financial regime, the estimates meetings of local authorities, which used to be the major decision-making occasions, lost much of their meaning and vitality and became deeply constrained by decisions taken at central government level. I believe that the control on rate poundages, more than any other form of central control on local authorities, has had a particularly depressing effect on the outlook and operation of the local government system. Indeed if anybody looks at the account figures for any local authority throughout the country over the last three to four years he will see just how effective that last sentence is.
If rate controls had the effect of improving local finances, there might be something to be said for them. In fact, the opposite has been the case. Coming into 1978, local authorities collectively enjoyed a credit balance on their revenue accounts of £5.8 million. By the end of 1982, this had become a debit balance of £43 million. The main reason for the deterioration is the fact that, since 1978, rate poundage limits have been consistently lower than the growth in prices generally. Let me illustrate this. Over the period from 1978 to 1982, the cumulative increase in rate poundages was 73 per cent whereas in the same period, the consumer price index rose by 102 per cent. There was, therefore, a drop of 29 per cent in real terms in rate poundages over the five year period. While I can understand that the prime objective behind the imposition of rate poundage limits was to protect the Exchequer, I believe that this objective could have been achieved by means which were more in tune with the need to protect and foster an effective system of local democracy.
I do not claim that this Government has easy or complete solutions to the problems I have just described. I am confident however that the general approach we are adopting to the question of local finance is the correct one and, given time, will restore much of the vitality to our local government system.
One of the first measures the Government adopted was to increase the rate support grants by £31.5 million in the budget for this year. This was necessary to relieve a crisis situation in the current finances of local authorities and to protect services and employment. The next step was to restore freedom to local councils to decide for themselves on the local rate in the £ without dictation from central Government. The third step was to increase the range of income sources available to local councils by opening new opportunities to them to charge for the services they provide.
I do not want to give the impression that the removal of central limits on local rate levels means that the Exchequer can, or will, underwrite unlimited rate increases through the rate support grants. This could never be possible. Local authorities are now responsible for a vast amount of public spending and cannot be isolated in any way from the need, under current economic conditions to take full account, in their demands and in their expenditures, of the realities of the times; to practise all possible means of achieving savings and to ensure the most effective possible use of their resources.
In future the rate support grants will be determined on a basis which will take account of the local authority needs as well as of the practical limitations on the amount of resources which can be made available for the purpose from central funds. These grants will be settled as part of the overall apportionment of national finances instead of by arbitrary limitation on local rate increases. This is the approach which has been followed in the current year and the approach proposed for the future, as provided for in section 9 of the Bill.
The central purpose of the Bill is to extend the powers of local authorities to supplement their incomes from local charges. They will now have a general discretionary power to charge for the services which they provide, where they lack such a power at present. Restrictions on charges specified in existing enactments will be removed. Provision is also made for the removal of the existing prohibition on charges for domestic water supplies in urban areas.
At the moment, there is a variety of provisions relating to charges and there are many anomalies. While, in general, local authorities have power to make charges, there are cases where there is no power in law to charge; there are cases where charges for particular services are specifically prohibited, and there are even a few cases where charges are specified in Acts of the Oireachtas. Domestic water users are liable to charge if they live in county areas but not if they live in towns. The Bill before us will have the effect of enabling these anomalies to be removed and will provide a consistent framework for local charges which is missing at present.
Under the terms of the Bill, the services for which charges will be made and the levels of charges will be left to the discretion of the local authorities. This is an important feature. As Senators know, standard charges have been prescribed for planning applications under the Local Government (Planning and Development) Act, 1982. Because of the nature of that particular service, it is necessary that the relevant charges should be standardised for all areas. There is no good reason, however, why charges introduced under this Bill should be fixed centrally. It is desirable that the local authorities should have a discretion so that account can be taken of what is needed, and what is considered to be fair and reasonable and of the best means of applying the powers in local circumstances.
The meaning of the word "service" for the purposes of this Bill is defined in section 1. This definition has been framed so as to cover the widest possible range of the services which are provided and to give local authorities power to charge for any of these services. The range of services is, however, confined to those provided on a individual basis, or, in the words of the Bill, "to any person or in respect of any premises". This means that services, such as street lighting or road sweeping, which are provided on a general or community wide basis, are outside the scope of the Bill.
Section 2 provides that any existing enactment which requires or enables a local authority to provide a service, but which does not contain a power to charge for the service, shall be deemed to empower the authority to so charge. This power to charge will apply even where the existing enactment does not allow for charges being made. Under this section, statutory restrictions on the level of charges will be removed. The effect of these provisions will be to supersede all the provisions which currently restrict local authorities from charging for services and from charging realistic amounts.
I know that local authorities will welcome the additional powers which they will have under section 2 to make realistic charges. I know, too, that they will welcome the discretion which they will have under section 3 to determine different rates of charge in respect of different classes of consumers or of services. This will enable account to be taken of such criteria as rateable valuation, type of premises, quality or frequency of service and so on and, when taken with the provision for payments by instalment in section 6, will be cases of persons who will not be able, because of their circumstances, to pay charges, even with the provisions for instalments. To cater for these cases, section 5 provides for waiver of charges on grounds of personal hardship. The Bill does not attempt to define those grounds or to restrict the exercise of this power because this is an area where the decisions must be made on the basis of local knowledge and experience. It is, however, desirable that there should be a reasonable consistency around the country as regards the approach to the granting of waivers and the eligible categories. I propose to issue guidelines to the local authorities to assist them in exercising the discretion which they will have in this matter under section 5. I am confident that the local authorities will approach the question of waivers in a considerate spirit and will deal sympathetically with all cases of genuine hardship.
Senators will note that the question of water charges is dealt with separately in section 8. The existing law provides for the making of charges for water except for water supplied for domestic purposes by urban sanitary authorities. It also contains provisions relating to the administration of these charges. With the abolition of domestic rates, the justification for the separate treatment of urban areas has disappeared. Indeed this situation is now unjust as well as anomalous. It means that those in urban areas have enjoyed a greater benefit from the domestic rate grant than those in county areas. It also means, for example, that corporation or urban council tenants' houses in a county area are paying the county council a substantial water charge in many cases while the corporation or urban council itself has no entitlement to such revenue from any householders in their own areas. It also means that those people who live in towns but are actually outside the administrative boundaries of the towns — a large proportion of towns people are in this situation; approximately 30 per cent of the nation's urban population are in this category — find that they are liable to charge while their neighbours within the municipal boundary are exempt. It has been decided, therefore, to extend the existing law to cover all water charges. We are also availing of this opportunity to provide for payment of water charges by instalment and for waiver of these charges, as well, on hardship grounds.
Section 8 of the Bill removes certain restrictions on the level of charges specified in existing enactments or agreements. This is necessary to overcome a situation by which Dublin Corporation are required under old laws and agreements to provide water to consumers in certain districts outside their administrative area at charges which bear no relationship to today's values. There is no justification for continuing this situation, hence the provisions in section 8.
Section 9 lays down a new basis for the domestic rate support grant, which I have already explained. It makes the necessary changes in the Local Government (Financial Provisions) Act, 1978, including provision covering the arrangements for the current year and the situation which arose in 1982 when the amount of the rate reliefs allowed by the local authorities was not fully recouped to them as envisaged in the 1978 Act.
It has, of course, been suggested in some quarters that what we are really about is the reintroduction of rates. I want to make it quite clear that this is not the intention and will not be the effect of this Bill. What we are really doing is updating, extending, and adapting to modern circumstances, the legal basis for direct charges for services which is an established feature of local finance and which, over the years, has existed side by side with the rating system.
Another issue which has been raised relates to the division of responsibilities under the Bill as between the elected councils and the managers. Under the Bill the responsibility for determining the amount to be raised by way of charges will rest in the normal process with the elected members in the context of the preparation and adoption of the estimates, while the responsibility for making the charges and collecting them rests with the manager. This is the logical arrangement with the elected members having the fundamental policy role and responsibility for establishing the level and the amount that has to be raised and the manager executing that policy with all its detail. It is also the established system and has worked well for many years. It applies, for example, to the fixing of water charges under existing legislation.
In practice, of course, elected members and managers generally work closely together in regard to matters such as this, and I expect that this co-operation will apply to implementation of this Bill as well. However, if councils want to take a stronger hand they can do this under existing law. They may, for example, appoint their own estimates committee if they did not already have one and determine what goes into it from the beginning. The council members also have power to require the manager to inform them in advance of the manner in which he proposes to perform an executive function and the manager must comply with such a requisition. It is clear, therefore, that the elected members have adequate powers to set the framework for charges as well as means of keeping themselves fully informed in advance and of bringing their views to bear as regards the implementation measures.
It was in this context that the decision was made to continue the existing division of functions within the local authority in the implementation of this Bill. I am satisfied that this is the right approach, particularly since the powers to charge under this Bill are an extension of existing powers rather than an entirely new departure. In deference, however, to the concerns that have been expressed I have undertaken to review the practical operation of the arrangements in two years time.
Should the review show that the arrangements referred to earlier on and, in particular, the relationship between the elected members and the manager are not working satisfactorily in this area of the division of responsibilities, and that councils have genuine grounds for complaint, then the Minister for the Environment has ample powers to deal with that situation. They include power to add appropriate functions under the Bill to the list of functions which are reserved to the elected councils.
I must stress that I do not see any reason why there should be difficulties in this area now any more than previously and I will be very surprised if significant difficulties do emerge. But on behalf of the Government I have given the undertaking to re-examine the position when the Bill has been in operation for a reasonable time, and I will abide by that.
I see this Bill as an important step in working towards a better system of financing for local authorities. It is only a step and more remains to be done. As the Minister for the Environment has already explained he is arranging for a special examination to be undertaken in the Department of the question of the future financing of local authorities for the medium and long terms. This examination will take account of the need for adequacy of funds for the various local programmes, the need for a significant degree of local financial independence and discretion, and the need to limit the demands on central funds for local services.
In a sense, then, this Bill is of an interim nature but it is, I believe, a valuable contribution in its own right towards increasing the discretion available to local authorities and widening the options available to them, in the financial area. I would like to think therefore that the Bill will have the full support of the House.
I commend the Bill to the House.