Wednesday, 9 July 1997
Dáil Éireann Debate
That Dáil Éireann regrets the Government's decision to reverse the proposals of the outgoing Government to empower local authorities to use motor taxation as a devolved funding mechanism designed to enhance local government in this country, and to substitute in its place a highly centralised system of funding.
This fledgling minority coalition Government, in an extraordinarily short time, has proved that it is an Administration of hypocrisy and U-turns. The few days of good weather we have enjoyed  has caused some of the Members on the benches opposite to change their minds on a number of matters. While some of the recent reconsideration of previously entrenched positions is welcome, other decisions that have been made, induced by what the Taoiseach and Leader of Fianna Fáil might call sun stroke, are not only regressive and petty but potentially extremely destructive.
The Minister for the Environment, Deputy Dempsey, not content with his newly found power and the trappings of ministerial office, has decided to roll back the progress and good work of the last Government by aborting one of the most fundamental reform packages for local government. In a press briefing last week the Minister said he would implement what is tantamount to a personal enabling Act when declaring that he had decided to reverse the reform package which gave independence, responsibility and resources to cash-starved local authorities. In effect, he has indicated that he will bring the local authorities under the iron fist of the Department of the Environment in which he is the ultimate arbiter. I understand he may have high political ambitions but this form of una duce una voce leadership went out of fashion more than 50 years ago in Italy, although, it could be argued, slightly more recently here.
Mr. Allen: 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?
Mr. Allen: I would like the Minister to outline  his views on the concept of water charges and the other matters to which he referred last week because I believe he will come under pressure from some of his colleagues in Government to introduce water charges.
Mr. Browne (Carlow-Kilkenny): Ar an gcéad dul síos ba mhaith liom comhgháirdeachas a ghabháil leat féin, a Cheann Comhairle as ucht an onóir a bronnadh ort le déanaí nuair a toghadh mar Cheann Comhairle tú. Táimid an-bhródúil as an onóir sin sa dailcheantar Ceatharlach-Cill Chainnigh.
Under Standing Order 999, which can be implemented by the Minister for the Environment, all his surplus votes should be transferred to me well in advance of the next election in Carlow-Kilkenny because he will not need them. I am sure that is agreed.
I am not happy that the Minister has changed the plan introduced by the previous Minister. I have been a member of a county council since 1979 and it is frustrating that we are not even messenger boys. We do not have power to do anything. If one does not have control over finance, one cannot pretend to have power. A good aspect of the arrangement made by the former Minister, Deputy Howlin, was that local authorities had an option in that regard. A good deal of fuss was made about the fact that car tax could be increased by 3 per cent if local authorities considered it necessary. That measure gave hope to all councillors.
In my youth at primary school I saw a statement written by the master when I went to his class for spellings from the junior class. The statement read that the farmers of Ireland got courage and hope when Michael Davitt founded the Land League. That statement always stayed in my mind. The councillors of Ireland got courage and hope when the former Minister, Deputy Howlin, gave them the means of raising funds and having some control over their financial affairs. I will not object if the Minister devises a scheme that will give councillors control. However, that will not be the case if we are returning to the bad old days when the Department sent word that the road from Kane's house to Murphy's house will be surface dressed when all the councillors, who are full of their own importance, can do is agree. They will not have power to do anything about, for example, a very dangerous bend two miles further down the road where a crash occurs almost every weekend. I would not have any qualms at council level in proposing a 5 per cent increase on car tax if I could say to the people that the revenue is for a specific purpose, say, to remove a dangerous bend, the scene of three fatal accidents and  numerous other crashes. At present councillors are in the worst of all worlds; they must take the blame but do not have the power to do anything about such problems.
The road from Carlow to Tullow does not have the status it should have and the road from Killerig to Arklow which is considered more important as it carries heavy traffic has been resurfaced. That work cost a great deal of money and the former Minister was very generous in that regard. The road from Carlow to Tullow has some dangerous bends but as it is not categorised as a secondary or regional road money has not been allocated for its resurfacing. Since l979 I have been asked by many people why work has not been undertaken to remove the bends on the road.
The public are convinced that every county council has a bucket of money and all that is at issue is deciding where the money should be spent. They do not realise that all the money received from the Department is earmarked for the provision of a number of houses, a treatment plant or some other project. I admit the council will be permitted to make recommendations on an order of priorities, but it would be good to be able to tell people that funds raised through increasing car tax would be used to improve the state of a road or on some other project. Increasing car tax might not be a popular decision, but we could stand over it if the funds raised were raised for the good of a county.
Regardless of the guise this may come under, we seem to be returning to the bad old days when the Department decided on the amount of money local authorities received. There may be a national crisis, the pound may come under pressure and interest rates may rise as we are only a small cork floating in a big ocean. While everything is booming now we do not know what will happen in three years' time. If there is a clampdown local authorities will be the first to suffer. The money that in theory might be readily available this year may not be in the future. Once local authorities have to return revenue to the Department we are caught. At local level a scheme similar to the rates system should be introduced. While that system had flaws at least if councillors spent all day arguing about increasing the rate by 1p in the pound they could justify the increase as long as they could tell the public they intended to use the funds to carry out certain work.
County councils experience the worst of all worlds. We are blamed for what is not done and we have no way of doing anything about that. The current form of benign dictatorship under which money is allocated by the Department and one is told what to do with it does not help anyone.
Ratepayers are asked to make up the shortfall. Under the old system at least we had scope to divide the burden. Many car owners do not pay rates. For that reason, the £3, £4, £5 or £6 extra they may be asked to pay in a year could raise a great amount of extra finance, depending on the  number of cars and allocate it to the running of local councils.
Ratepayers are sitting ducks. The county manager decides how much money he needs to run the county based on the amount received from the Department. The ratepayers make up the difference. They give employment and this is another tax on them. They are tax collectors and ratepayers and are sitting ducks when it comes to paying for the running of local councils. That should change.
There is also the difficulty of the rate support grant. Everything was to be sorted out when rates were abolished. VAT revenue was to be used to pay for this and that. Some counties were fortunate enough to have spent a great deal of money at certain times and they received a substantial rate support grant. The previous Minister for the Environment, Deputy Howlin, is aware of the fight that took place to increase the rate support grant for Carlow because we were far behind other comparable towns. I pay tribute to the former Minister.
Mr. Browne: (Carlow-Kilkenny): Forty thousand pounds. If the Minister can do that, he will enjoy the same status as Minister Howlin in Carlow. He will be welcome back to Carlow any time. As the only Deputy in Carlow I guarantee him an official welcome.
Mr. Browne: (Carlow-Kilkenny): We spent a great deal of time talking about car tax in Carlow County Council. Perhaps we were more alert and ahead of our time. We said how stupid it was to send money collected in Carlow to Dublin and then receive a proportion of it back. One good  aspect of the new changes was that we could keep the money we collected and the equalisation fund would look after the counties that could not match others because of the number of cars on the road.
There will be no equalisation on rates. There is no balance for ratepayers who keep the show going. Equalisation was a very good idea. It catered for counties that did not have enough cars to raise sufficient revenue. We will continue to send our money to Dublin and the Department will magnanimously say it is allocating a certain amount to us. We will be doing the same type of work — the road from Murphy's house to Ballin-acarrig and back.
The Minister is shaking his head in disagreement. I hope I am wrong and that the scheme will give us control over finance. This is not only about getting money from the Department but having control over how we raise revenue and how we spend it. Without the power to raise finance, councils cannot do anything. When times were rough — we had a few bad years — county councils suffered. If there is no money in central funds and inflation and interest rates increase, county councils suffer.
I hope the scheme the Minister will introduce will be different to the one I suspect he will bring in. I am afraid my trust in the Minister's scheme has gone before I hear him spell it out. However, from the Minister's confident smile I presume he has something up his sleeve. I look forward to hearing him tell us he has replaced a good scheme with a better one, not one that returns to the bad old days when we all looked up to heaven and gave up in frustration.
Minister for the Environment (Mr. Dempsey): I congratulate the Ceann Comhairle on his appointment to the Chair and I am sure he will do an excellent job. Deputy Browne's tributes to the Chair were very sincere; at least, there is one less rival in the constituency though it might make it harder for candidates in a four seat constituency. I sincerely offer the Chair my congratulations.
Mr. Dempsey: ——we will be able to work together, particularly in the area of local government in which I have had a deep interest for many years. My aim is that between us we will work out a system that will be good for councillors and local government.
Deputy Allen's good wishes were somewhat spoiled for me when he spoke of iron fists and so on. On a number of occasions I was in Opposition when he delivered speeches as a Minister of State in the Department of the Environment. With all  due respects to my officials, he seems to have changed his scriptwriters. The rhetoric before was quite astounding. If the Deputy is getting rid of a scriptwriter we might ask him to brief some of the Department officials.
Mr. Dempsey: I am pleased, so early in my tenure in the Custom House, to have been afforded the opportunity to share with the House my thoughts on local government and how I propose to develop the system over the next few years. Deputy Howlin, who is present, last December launched his programme of reform entitled Better Local Government — A Programme for Change, and I was among the first to welcome it in principle. On Deputy Allen's point about being consistent, I am being consistent. At the time I expressed strong reservations about the funding aspects of the programme. I told the then Minister in no uncertain fashion of my opposition to the use of motor tax as the prime method of channelling funds from the State to local authorities for current expenditure. I clearly spelled that out and believed there was no logic in that decision.
Deputy Browne made a number of points about tying motor tax to expenditure on roads. It is entirely fitting to use motor tax funds to improve our road network. There should be some link between motor tax and roads funds.
There were many things in the document Better Local Government — A Programme for Change that I favoured; for example, the proposals on local government and the new local development initiatives. The emphasis placed on quality services and the widening and deepening of local democracy through an overhaul of the local authority committee system are measures I supported at the time and will endeavour to put in place in the coming years. I endorse the empowerment of local councillors and the approach where local communities will be able to closely identify with their local authorities and councils. I welcomed these approaches in Opposition and am delighted to be in a position to advance them. In addition, at the launch of our policy document and the joint programme for Government, I stated we would also put forward other proposals. I am sure Deputies have read the Fianna Fáil policy document on local government.
Mr. Dempsey: I have no doubt it will be put on the record of the House. I will try not to read too many advices received by the previous Minister on other matters into the record of the House. In the introduction to the policy document, I made it clear it was not drawn up to rewrite Better LocalGovernment but to be used as a basis, along with the KPMG report, for other proposals. In it we outlined in general terms points of difference. The combination of Better Local Government, our policy document, An Action Plan for the Millennium and other individual policy documents will be good for local government in the years ahead.
Partnership has become a critical feature of the success of many initiatives and programmes throughout the spectrum of society. At national level partnership between the social partners, as initiated by Fianna Fáil and promoted by successive Governments, has been the springboard for national regeneration and economic success over the past decade.
At local level, local development bodies have shown what can be achieved by partnership. Partnership will permeate the local government system of the 21st century. Partnership between the local authorities and the local development bodies, between councillors and staff and between local authorities and their customers will be important.
My definition of this partnership means local authorities working with others on the basis of equality and mutual trust for the betterment of the communities they serve. Nowhere will this sense of working together be more evident than in the new relationship we hope to put in place between local government and local development systems by the year 2000. It is difficult to imagine the strategic plan of any modern organisation, big or small, public or private, which does not focus on a quality customer service. Local authorities are, and should be, no exception. My programme of reform will reinforce the existing commitment of local authorities to quality service. It will build on the work of local authorities to date and will map out a strategy for the delivery by authorities of a top-class service in all their operations. The programme will deal with quality service measures such as one-stop-shops, co-ordinated actions, complaints procedures, service standards and performance indicators, all of which were adverted to in Better Local Government.
I am the first to acknowledge the tremendous progress made by local authorities in recent years on the customer services front. Despite this, we would all admit that more needs to be done. The talent, commitment, hard work and public service ethos of councillors and staff alike is a great base on which to further enhance the customer service focus of local government for the future.
Of course local democracy, local government and quality local services do not come free and they do not come cheaply either. Local authorities spend about £2 billion pounds a year, that is, almost one twentieth of our gross domestic product. The demands on local government are growing each year. Each year new statutory functions are conferred on local authorities, often without additional resources. More stringent quality standards, many of which are EU policies, are being demanded of local government each  year. These improved standards, while generally welcome and desirable, nevertheless place a financial strain on the ability of the local government system to continue delivering. The financial strain has in many cases led to a situation where local authorities have had to cut back, or to cut out altogether, some of the services they provide. This is not good enough. If we are serious about local government and local democracy, then we simply must ensure that local authorities have enough money to get on with the job we both demand and expect of them.
The previous Government commissioned a professional study of local government funding. The consultants, KPMG, produced a useful analysis of the future expenditure requirements of local authorities in June 1996. The report concluded that on the basis of existing investment programmes current expenditure by local authorities is likely to increase from £1.22 billion in 1995 to £1.45 billion in the year 2000, an increase of £227 million or 18.5 per cent in real terms.
The consultants also looked at various ways of projecting future local authority revenue over the same period. The most realistic revenue projections indicated that local authorities would be likely to be short some £33 million per annum by the year 2000 under the funding arrangements then in place. This assumed a continued commitment to the roads restoration programme.
KPMG went on to systematically examine existing and potential sources of funding for local authorities. None of the potential funding options examined by the consultants was ideal and none of them was introduced.
Mr. Dempsey: Each had its strengths and weaknesses. That, I suppose, was only to be expected bearing in mind the way local government financing has developed over the years. Had an ideal, faultless and painless solution existed, it would have been introduced long before now.
In fairness to my predecessor, he took action on foot of the report. He did not simply consign it to the library shelves to be looked at and referred to by local government historians in years to come along with the 18 or 19 other reports. However, while commending the previous Minister and the previous Government on its commitment to tackle the problem of local government funding, I am afraid its response fell far short of what was required. The decision to use motor tax as the primary central funding source for all local government current expenditure was no more than a short-term stopgap exercise.
All the reports down the years have put forward the view that the ideal local government funding system would comprise a separate system of taxation, specifically raised and collected by local authorities. However, the reality of the situation today is that the principle of seeking a local source of finance was buried and abandoned  by the decision of the previous Administration to abolish domestic water and sewerage charges. In practical terms, there is no going back on that decision.
Mr. Dempsey: The decision to use motor tax as the primary source of local government funding seems not to have been fully thought out, and it is flawed on a number of counts. I believe it is wrong in principle to expect the motorist to finance local government. It is wrong to expect any one sector of the community to fund the wide range of local services that are provided for the use of all. Second and more pragmatically, I do not believe the motor tax option has the ability in the long-term to meet the growing demands of local authorities as identified by the KPMG report. Simply replacing rate support grant and domestic water and sewerage charges with motor tax was little more than a cosmetic exercise designed to pretend that local government was being put on a much stronger footing. The reality is that local government needed more than a simple shifting of funding sources. It needed more money and a funding system with inbuilt buoyancy to meet the needs of local authorities into the new millennium.
Apart from a shortage of funds, a critical draw-back of the current financing structure — which was referred to by Deputy Browne — is the excessive control which the centre holds on how local authorities spend their money. I hasten to add that I do not attribute this weakness to my predecessor, nor to one or two of his predecessors, but rather to the way the system has evolved over time. Regardless of the history behind the current practice, I intend to introduce measures which will give greater discretion to local authorities in spending their money.
In the Local Government (Financial Provisions) Act, 1997 which Deputy Howlin steered through the Oireachtas, provision is made to allow local authorities to vary the rate of motor tax by up to 6 per cent — 3 per cent this year and 6 per cent next year and the year after. This was supposed to be the element in the package which would conjure up local accountability, local democracy and local discretion. The truth is that it was little more than a conjuring trick. It attempted to create an illusion that the power of  local variation equated with real decision making power. This is nonsense — the local variation was just a sop to democracy, a poor man's local government. The average rate of tax on a car is £186 per year. The local variation power would have allowed local authorities to raise, on average, only an extra £6 per car in the period up to April 1999, rising to £12 per car thereafter. No further increases were allowed after that. Not only was this a meaningless gesture to real local government, it again targeted the motorist.
The local variation power also involved an unwieldy consultation process between county councils and urban authorities. This purported to introduce an element of local accountability and decision-making power to the urban councils but it was another illusion. At the end of the day, following the so-called consultation, the county council was given power unilaterally to decide the rate, irrespective of the urban council's views. That is not my idea of local democracy.
Furthermore, I am not sure the previous Minister fully considered the potential for confusion and cross-Border car taxing that would arise as authorities around the country levied different rates of car tax. I have already said I will put arrangements in place to stand down the local variation consultation process which has just begun. Needless to say, the only time I will revisit this issue will be when repealing section 9 of the Local Government (Financial Provisions) Act, 1997. Anyone who served on an urban district council and a county council which levied different water rates will understand what I mean about varying rates of car tax.
To address the weaknesses in current financing arrangements which I have identified, the Government's policy agreement, An Action Programme for the Millennium, sets out my key priorities in this area, which are: establishing a statutory local government fund to finance a range of expenditure programmes; allowing greater discretion to local authorities in spending priorities based on their performance and the value for money they obtain; and financing county road improvements from national motor tax receipts with suitable equalisation, such funding to take into account the findings of the national county roads survey.
These priorities will be complemented by measures to improve efficiency throughout the local government system through, for example, the comprehensive value for money audits to which we referred when the legislation was going through the House. A proper funding system would enable me to put an end to the existing unacceptable practice, to which Opposition Deputies referred, of placing an undue burden on the commercial sector, especially small businesses, through huge increases in rates.
As Deputies will be aware, many of the State grants and subsidies allocated to local authorities are directed towards specific projects or schemes. While I am advocating increased discretion in how local authorities spend their money, I fully  acknowledge that the State has a function in some areas of expenditure by local authorities because some schemes may have national, as opposed to purely local, importance. Furthermore, many projects are EU co-financed and, as such, require a degree of central co-ordination and control. That said, there are a number of areas of centrally funded expenditure on which decision-making could more appropriately be made at local level without any loss of necessary central control.
Such enhancement of local democracy and decision-making would be advanced by the proposed local government fund. The local government fund will incorporate existing discretionary funds available to local authorities and, in addition, will replace some specific grants paid to authorities. The fund will be financed by assigning to it a specified percentage of national taxation. This broadly based source of funding is in sharp contrast to the targeting of the motoring sector to fund local government. It is, thus, a fairer and more democratic proposal.
Moneys from the fund would, as far as possible, be made available to local authorities as general grants over which they would have complete discretion as to their use. However, in order to ensure implementation of certain national policies part of the fund can and will be allocated towards specific programmes. Over time, the aim will be to move as far as possible towards general discretionary or block grants. The extent to which this is done will be determined on an individual local authority basis, having regard to the efficiency of each authority in performing its functions as determined on the basis of value for money audits which will be carried out on a regular basis.
I am talking about a carrot and stick approach to local government. The rewards of local discretion will go to those local authorities which demonstrate their abilities to deliver the right kinds of services, serving their customers to best effect and who show an appetite and desire for responsibility. On the other hand, the rewards of extended discretion will not apply to those local authorities who cannot demonstrate they are ready for a more autonomous role in the delivery of their services. The “stick“' will be the continued detailed involvement of my Department in determining the use of resources within the local authority. In effect, local authorities will decide for themselves which route to follow.
My long-term goal will be to set the framework for the blossoming of local government. A cursory glance at or a disingenuous representation of my proposals might prompt a suggestion that it advocates a centralised approach to local government. However, the reality is that as local authorities get to the stage where their financial performance and ability to deliver services influence their level of funding and the extent of their freedom to make choices, councillors will be asking questions about the efficiency and effectiveness of their authority compared with others.
The new funding arrangements I propose will  place major emphasis on making the necessary resources available to improve our road network. In accordance with our programme for Government the proceeds of motor taxation will be directed towards the non national roads programme.
The non-national road network is of particular economic importance in Ireland because industrial development is widely dispersed throughout the country, as are tourism and agriculture which are very important economic activities. Therefore, the network of non-national roads provides mobility within and between local economies and provides vital links to the strategic national roads network and the ports and airports which are our links with the wider European community. Rural regeneration will depend on the availability of good quality services such as roads to encourage necessary development.
It is particularly important, therefore, for us to invest realistically in the network and generally to improve our non-national roads to an acceptable standard. As my predecessor found and as we all know, that places a very heavy burden on each one of us since we have more than three times as many kilometres of road per 1,000 population as, for example, Italy and Spain. That, combined with our low density of population and low level of urbanisation, means that maintaining our public roads system in general, in particular its non-national element, creates very major financial demands.
In addition, there is much more wear and tear on our roads and heavier traffic. Weather and ground conditions also adversely affect road conditions, particularly in winter and the increasing size and weight of the heavy goods vehicle fleet has played its part in the deterioration of our roads.
We know, and certainly local communities know, the non-national roads network has deteriorated in many ways to an intolerable degree, due mainly to lack of investment over the years, which is unacceptable in terms of its economic and social cost.
I am happy to acknowledge the constructive actions of the outgoing Government to improve our roads. I shall endeavour to build on that work to benefit everyone. It is difficult to think of any item of infrastructure, below acceptable standards, more to the forefront of people's minds than local roads. The disintegration of local roads is obvious to all.
The restoration programme already in place was a good start by my predecessor. I intend to continue to transform the condition of our non-national roads network within the lifetime of this Government. This will cost a great deal of money, which prompts me to mention a somewhat peculiar  position which has obtained to date. The most basic questions to be posed in relation to non-national roads is the extent of the problem and, how much it will cost to remedy it. Amazingly the answers to those questions were not available in the Department during my predecessor's tenure of office. There were many reports in the Department but none that spelled out in detail the cost of such remedial work. That information deficit is being rectified. The report commissioned by my predecessor to determine the deficiencies of the system has just been received in the Department. A consortium headed by Ové Arup and Partners was appointed in May 1996 to undertake the road pavement conditions study. Its report is being studied in the Department. It shows that 55 per cent of the non-national roads network is in need of either surface restoration or reconstruction and confirms the huge amount of work remaining to be done before our regional and local roads can be restored. The report does not cost the works identified as being necessary and that will be the next task of my Department. The approach which will be used to apply the unit rate costing to the areas identified in that report as requiring remedial works will be based on average rates derived from local authorities' own multi-annual programmes. This approach will give us a very clear picture of the cost of remedying the backlog of deficiencies in the network.
There was little logic in using motor taxation to fund the provision of a free water supply for certain sections of the community. It is important that there be a clear link between services supplied and payment for them by the customer or consumer. Therefore, it is entirely appropriate that motorists, through motor taxation, should contribute to the development and upkeep of our roads. It is also appropriate that motorists see that the money is spent in that way. This proposal will not only make the payment of motor tax more acceptable to the general public but will ensure sufficient and significant funding is available to fund programme needs.
Value for money has been mentioned and while I claim no credit for initiating this aspect, it is one in which I strongly believe. The taxpayer deserves value for money and councillors need to know, when making decisions, that money from the Department or from the local government fund is spent effectively and efficiently. I do not have time to go into this matter, which was raised by a number of Deputies, but value for money will be very much to the fore in my tenure of office in the Department of the Environment.
Mr. Howlin: I will begin as the Minister ended by congratulating you, a Leas-Cheann Comhairle, on your appointment. I did so privately and am glad to do so now publicly. I also wish the Minister for the Environment well. It is a great honour to serve in the Department of the Environment,  which has an impact on every parish and hamlet. It was my great pleasure and honour to serve in that Department for two and a half years. I am sure the Minister has found a wonderful staff, amazingly adaptable to change policies and write scripts to suit those policy changes. The Minister will have a very happy time there because making decisions and, almost uniquely, seeing them take shape around the country is rewarding.
In whatever job I am given in terms of spokesmanship I look forward to monitoring the progress of the Minister for the Environment. I regard the section dealing with local government as one of the most important. The incoming Government, at least last week — many changes have been made in terms of policies announced last week — intended changing the name of the Department to the Department of the Environment and Rural Development, but it would be better to call it the Department of the Environment and Local Government because that aspect is such a heartland of the Department.
I said two and a half years ago when I went into the Department that I would not have a full Dáil term before the election and I did not want to look beyond the election in terms of time to achieve objectives. I wanted to focus on the two key priority areas of local government and environmental protection. I hope the work achieved in my time in the Department forms a basis for improvements for the future. I recognise the kind comments of the Minister in that regard.
I am profoundly concerned at the first decision of the Minister for the Environment in regard to local government, to dismantle the new funding arrangements which took a long time to argue through. That is a major and retrograde step. There are many vested interests, not in the Department of the Environment but in the Department of Finance, that did not want the ground-breaking changes the former Government managed to bring about. I wanted to hear tonight from the Minister about the new programme he would put in place and how the important objective he has re-echoed of giving autonomy to local government would be realised. There is nothing in last week's press release in that regard. There is to be established a new local government fund, but what is it? Will it be made up of all revenues, all taxation? Will it be a percentage of income tax or value added tax, or a combination of both? What percentage will be used? How does the Minister propose to arrive at a figure for equalisation? We were not given this information last week and I thought we deserved to obtain it during this debate. The Minister has worked hard in terms of developing policy and we deserve to be informed about the effective, buoyant, locally democratic system he intends to put in place. However, we are no wiser having listened to his contribution.
In respect of the new funding system, the Minister stated that he intends to establish “a statutory local government fund to finance a range of expenditure programmes”. What does that  mean? From what source will the fund be financed, what percentage of income will be allocated to it and to whom will the money involved be given? What is the nature of the “expenditure programmes” to which the Minister referred? The Minister is informing local authorities that they cannot have the funding provided by the former Government but he has not informed the House or local government with regard to what will replace that funding. The Minister's words are meaningless.
The Minister also referred to allocating “greater discretion to local authorities in spending priorities”. He should spell out what that means. He used the totally meaningless phrase, “financing county road improvements from national motor tax receipts”. What percentage of such receipts will be allocated? As stated, the Minister's assertion is meaningless. I could state that non-national roads were funded from motor tax in recent years because Exchequer moneys were used for that purpose. If the Minister does not honour the decision of the previous Government to devote and ring-fence the proceeds of motor tax to local government, in whatever guise, he will return those proceeds to central Government.
Some other gems appeared in the Minister's speech. I do not understand the statement that the “local government fund will incorporate existing discretionary funds available to local authorities”. What “existing discretionary funds” will be subsumed into this fund? We are also informed that, in addition, these funds “will replace some specific grants paid to authorities”. What grants are they intended to replace?
Mr. Howlin: I will see? That is a case of “live horse, get grass”. Today the Minister has announced the abolition of a good funding mechanism. He is aware that a substantial pool of money has been building up since 1 January. This money was created by the former Government and is now being taken away from local government. Local authorities have not been informed about what will replace this funding.
During his contribution the Minister referred to his support for local government. However, I have never come across a more patronising, big brother attitude, particularly when the Minister stated “the rewards of extended discretion will  not apply to those local authorities who cannot demonstrate that they are ready for a more autonomous role in the delivery of their services”.
Mr. Howlin: It appears that if one cannot satisfy the Minister for the Environment, Deputy Dempsey, that one is good enough, one will not receive anything. Each local authority will make its supplication to the Department of the Environment asking whether they are good enough to control their affairs.
In December last year, on behalf of the then Government I announced the launch of Better Local Government — A Programme for Change. Following 25 years of public debate, I announced action. I stated that the Government's objective was to create a modern, efficient and properly resourced system of local government. The proposals were balanced, comprehensive and radical but realistic. I travelled the country following the launch of that programme and met every local authority representative at five regional meetings including members, officials, others involved in community development and those dependent on local government. People across the political divide were genuinely excited by the changes and by and large they supported them.
My objective from the outset was to build a political consensus because it is not a party political issue. When in Government I said the parties in this House would change position — and looking at the events of today it may not be worth our while unpacking on this side of the House. Local government is what is important and most parties want to enhance, support and develop local government, or at least pay lip service to it. The opportunity was there. They welcomed the empowerment of local councils implicit and explicit in the programme. They welcomed the establishment of a strategic policy committee to deepen the democratic role of the elected member and to effectively redress the imbalance between elected members and officials. By and large they supported the radical measures outlined and wanted them implemented.
I am glad to debate issues such as value for money, the deepening of democracy, enhancing the systems and quality initiatives which are outlined at length in the programme. I wrote the foreword and contents of it with great support from very efficient officials and I support every word of it. However, it is all predicated on a proper funding system. Having considered all the  issues in relation to funding and the KPMG study commissioned by the Government, we decided to opt for a new local revenue system to replace the centralised rate support grant and to abolish from 1 January 1997 domestic water and service charges, something that had become a bone of contention in local government over the past 15 years or more. The new system meant——
Mr. Howlin: The Minister should not speak out of the side of his mouth. If his heart is not in this issue and if he believes that water charges are right, as he half suggests again and again, he should reinstate them. If he is not going to reintroduce them then he should not say people only objected to them in some places. He should decide on what is right and then do it. He is not in a situation where he cannot undo something done by a previous Government. He is the Minister now and he should act according to what he believes is right.
From 1 January 1997 we abolished charges for domestic water and sewerage. I believe this was right as it removed an issue of contention from local government and allowed it address real issues in a positive manner. The new system meant the entire proceeds of motor taxation were ring-fenced for local government, providing their own revenue base. Uniquely among any service in this country, local government was to have its own buoyant taxation base. After a major battle an historic position had been arrived at. For the first time local government had its own dedicated revenue base, untouchable by the Department of Finance. It provided their own legally constituted tax base which was already collected by them. It meant every local authority would be immediately better off. The proposals were enacted by the Oireachtas under the local government financial provisions legislation. It marked a new and positive beginning for local government.
When in Opposition the current Minister broadly welcomed the contents of Better Local Government, a welcome reiterated by him tonight. However, for the sake of opposition, he impaled himself on a promise to undo the ground breaking finance proposals contained in that document.
No matter how he dresses the issue up now, the Minister's first decision on local government is retrograde. As local authorities were about to shake off the yoke of central Government, Deputy Dempsey and the new Administration have decided to rein them back in. Local government will get what the Minister decides it will get, no more and no less.
There was a cry of delight at this decision in the Department of Finance in Merrion Street; the officials there lost out last year but they have won with this new Administration. Once again, they have total control of tax revenue and local government is the poorer for it. The liberating  proposal of a dedicated local tax, not subject to Merrion Street but going directly to local government, is now to be abandoned. I cannot think of a worse start to the tenure of a Minister for local government and I predict the Minister will forever regret this ill advised reversal of a progressive, long-awaited and much welcomed reform.
The legislation is there and the local government fund, for which I signed the order, is in place and is being built upon day by day. Once the £100 million in rate support grant was reached, all subsequent motor tax revenues were to be distributed to local government by order of the Government. Local government is hungry for that. If this Minister is to take that away I would like him to answer some straight questions. How much motor tax revenue, that will not now be distributed, is in the local government fund at the moment? How much would be there by the end of the year? Projections have been made by the Department. How much do these projections show would be in the fund by the end of 1998? We had reached a stage where, at last, local government was to be allowed the freedom to reach its full potential. The new Government will not allow that; it will not allow an independent local government system and will not countenance a dedicated, untouchable tax base to fund it. If the Government will allow that, it certainly has not been explained to us. Unfortunately, for the supporters of local government it is a case of “back to the future”.
I know the Minister is well meaning. I know him as a formidable adversary across the floor of the House and he is well disposed to stronger local government but however well meaning he is, once the principle of a dedicated tax base is abandoned, it will not be possible to have anything other than a local government system sub-servient to the Custom House as it always was and, now, always will be. The Minister can promise to make good the money this year but as Deputy Allen said, when the wind changes and there is pressure on the pound or when inflation rises and funding is required for something else it will be a simple decision to squeeze local government again unless we have a legislative wall between central and local government. This decision is bad for democracy and local development.
Part of Ireland's success over the past five or six years has been the empowering of local communities and the unleashing of their potential. We have only started, but we could do much more. In my own county £5 million is being expended arising from the filming of a £50 million film on the beach of Curracloe because a local film commission was established, funded by the county enterprise board with local support. This tremendous potential in so many areas is there to be tapped and unleashed, but it will not happen.
I am not aware if the Minister has had the opportunity to read the conclusion of the report published by the Convention on Quality in Local Government that was held last year, one of the  most useful of its kind in which I was involved. For two days I brought together the recipients of services of local government to talk to the local government practitioners and to tell each other — they were always telling me — what was wrong. The debate was most useful and stimulating. Tremendous ideas flowed from it which were subsequently incorporated in the programme for better local government.
The ideas on servicing the customer, developing efficiencies and enhancing local democracies are predicated on an independent local government system. The European charter on self government was approved by the previous Government and is awaiting the approval of Dáil Éireann. I know the Minister will introduce a motion to the House to confirm that convention. Our obligations under it are predicated on the independence of a local government system.
When attending the regional conferences I saw that we were on the threshold of a new confidence in local government. It has been dealt a severe blow. Many issues have arisen. I hope, for example, that the co-ordination of local development will be preserved. The plethora of local organisations that had emerged needed to be anchored somewhere and it was proposed that they be anchored in the democratic local government system. I hope that is to be continued.
The contentious issue of service charges has been touched upon. We cannot be certain of the Government's position on this matter, despite the Minister's remarks. Multi-annual budgets have been decided on for central Government. Will similar provision be made for local government? Will we give local governments the ability to plan and make commitments to those who require services?
There has been much talk about the roads by the Minister and other Deputies. I recognised the need for a major initiative on county roads. This year we will spend virtually a quarter of a billion pounds on non national roads, the bulk from the Exchequer and £60 million from local authorities in matching funds. That would have been unthinkable three years ago. Will the Minister continue this and how will it be funded? What percentage of the road fund will be given to it?
Will the Minister maintain the housing programme that we brought to a high level or will he return to the housing policy of the early 1990s when Fianna Fáil and the Progressive Democrats were last in Government and virtually no houses were built? How will he deal with the challenge to local authorities of waste management? Will he continue the policy of devolving to local authorities powers previously undertaken by the previous Government with regard to staffing and other matters?
Other issues of great importance are destined to occupy tomorrow's news heads in all the newspapers. However, this debate is as important as any for the future of our democracy. I appeal to the Minister to think again because he is making a grave mistake. I also appeal to the Independent  Members, most of whom have long service in local government, to think hard before they vote on this motion tomorrow. I wish the Minister well and I hope, for the sake of the future of local democracy, he will reconsider his views on this fundamental issue.
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