Oireachtas Joint and Select Committees
Thursday, 2 March 2017
Public Accounts Committee
2015 Annual Report of the Comptroller and Auditor General and Appropriation Accounts
Vote 34 - Environment, Community and Local Government
9:00 am
Seán Fleming (Laois, Fianna Fail)
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We are now dealing with Vote 34 - Environment, Community and Local Government. We are also dealing with the Comptroller and Auditor General report 2105, chapter 4 regarding central funding to local authorities and chapter 5, progress on land aggregation.
From the Department of Housing, Planning, Community and Local Government we are joined by Mr. John McCarthy, Secretary General; Ms Maria Graham, assistant secretary; Ms Mary Hurley, assistant secretary; Ms Lorraine O’Donoghue, principal officer; Mr. Barry Quinlan, principal officer; Mr. Kevin O’Donoghue, principal officer; Ms Finola Moylette, principal officer; and Mr. Barry Ryan, finance officer. We are also joined by Mr. Tom Heffernan from the Department of Public Expenditure and Reform.
I remind members, witnesses and those in the Public Gallery to turn off their mobile phones completely.
I wish to advise the witnesses that by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. If they are directed by the committee to cease giving evidence on a particular matter and they continue to do so, they are entitled thereafter only to qualified privilege in respect of that evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person, persons or entity by name or in such a way as to make him, her or it identifiable.
Members of the committee are reminded of the provisions of Standing Order 186 to the effect that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such a policy. Finally, members are reminded of the long-standing ruling of the Chair to the effect that they should not comment on, criticise or make charges against a person outside the House or an official by name or in such a way as to make him or her identifiable.
I call the Comptroller and Auditor General to make his opening statement.
Mr. Seamus McCarthy:
The activities of the Department of Housing, Planning, Community and Local Government are provided for financially through a Vote account and the local government fund, which are accounted for separately. In 2015, the Vote recorded gross expenditure totalling €1.2 billion, while the fund recorded expenditure totalling €1.8 billion.
There are some transfers between the Vote and the fund but a consolidated statement of the Department's receipts and payments is not prepared. While the Vote is mainly Exchequer-funded, the local government fund is mainly financed by motor tax receipts, approximately €1.1 billion in 2015, and local property tax receipts, which amounted to €469 million in 2015.
The breakdown of the Vote 34 expenditure in 2015 is indicated in the figure on screen. This uses the programme structure as defined in the Vote. The housing programme accounted for over half of the Vote expenditure in 2015. Expenditure on this programme was €646 million, which represented an increase of €52 million year on year. Almost all of this increase related to additional provision for local authority housing programmes. The most significant increase in the Vote year on year was in respect of the local government programme. Total expenditure in 2015 was €275 million, compared with €36 million in 2014. The 2015 expenditure included a payment of €241 million to the local government fund to provide a contribution towards the transfers from the fund to local authorities and a subvention of €92 million paid to Irish Water. Vote expenditure on the water services programme 2015 totalled €131 million, an increase of €94 million year on year. The increase was due to the payment of household water conservation grants in 2015. The grant scheme was administered on an agency basis by the Department of Social Protection but the related grants and agency administration costs were borne on Vote 34. After appropriations-in-aid totalling €46 million, the net surplus on the Vote at the end of 2015 amounted to €84 million. With the approval of the Minister for Public Expenditure and Reform, capital funding of €41 million not spent in 2015 was carried over to 2016. The remaining €43 million was surrendered to the Exchequer.
Chapter 4 of my report aims to present an overview of the level of funding provided by central Government to local authorities and the purposes for which that funding is provided. Relevant information is drawn together from a number of accounts to get a full picture of the complex financial transfers and of trends over time. Central Government transfers to local authorities of almost €2 billion in 2015 represented just over 34% of the 2008 level of those transfers when they peaked at around €5.8 billion. The decline reflects the general reductions in public expenditure since 2008 and the transfer of certain responsibilities away from local authorities. As evident from the figure which can now be shown on screen, the reduction in transfers has impacted most on local authority capital spending. This impacted especially in the areas of social housing and roads. In 2014 the Department provided general purpose grant funding to local authorities mainly for their day-to-day activities. General purpose grants were discontinued in 2015 and were replaced by annual local property tax allocations. This resulted in adjustments of funding for some local authorities. Under the 80% retention rule provided for in the local property tax regime, 19 local authorities would have been allocated less funding in 2015 than in 2014. However, equalisation funding of €102 million from the residual 20% of the tax was utilised to bring those local authorities to the same level of funding that they received in 2014. The retention based allocations for 12 authorities and these were mainly large urban authorities in commuter belt counties were some €177 million higher than the amounts they received in 2014. Total funding of €239 million was provided to those local authorities in 2015 but they were directed to allocate €131 million for housing services and €22 million for road services, with the balance of €86 million available for general or discretionary purposes within those local authorities. In addition to the €2 billion funding provided by Departments and agencies in 2015, an amount of €427 million was transferred directly from the Exchequer in the form of once-off payments to local authorities. This was to allow the local authorities to repay borrowing from the Housing Finance Agency that had been used in the past to fund local authority water supply and treatment infrastructure that had since transferred to Irish Water.
Chapter 4 also provides a brief overview of the key structures in place for the oversight of local authority finances. These are the local government audit service and the National Oversight and Audit Commission. I previously reported on the Department's implementation of the land aggregation scheme and this was examined by the committee on 5 February 2015. Under the land aggregation scheme, local authorities could transfer to the Housing and Sustainable Communities Agency, referred to as the Housing Agency, surplus residential development land on which there were outstanding loans. The loans were due for repayment to the Housing Finance Agency. Between 2010 and 2013, the Department approved 73 sites for transfer with a total land area of 247 ha. My previous report, which was completed in mid-2014, found that there were very significant delays in effecting the transfers of many sites to the Housing Agency. By July 2016, however, we found that all but six of the approved sites had transferred.
The focus has consequently now shifted to a strategy for the management, utilisation and ultimate development of these and other sites. Progress in developing and utilising the sites as at mid-2016 can be summarised as follows: no housing units had yet been completed but development had been approved in respect of 185 homes on seven sites and proposals were being worked up in the context of another 180 homes across five sites; and 1.6 ha of land on two sites had been transferred to the Department of Education and Skills for a school and to a community organisation for a children's recreational facility to promote sustainable communities. However, 93% of the sites had either no proposed development in place or had not yet been transferred to the Housing Agency. The Accounting Officer will be able to update the committee on developments in regard to the acquired land since the reporting date.
The key agencies in respect of 2015 would have been the Environmental Protection Agency, Pobal, An Bord Pleanála, the Housing and Sustainable Communities Agency, the Western Development Commission and the Residential Tenancies Board. There are a couple of other non-commercial State bodies which do not fall within my remit, namely, the Housing Finance Agency and the Local Government Management Agency. I thought that might be useful to the committee in its deliberations.
Mr. John McCarthy:
I am pleased to be here this morning as Accounting Officer to assist the committee in its examination of Vote 34 and Chapters 4 and 5 of the Comptroller and Auditor General's annual report for 2015 dealing with central Government funding and local authorities and progress on the land aggregation scheme, respectively. As requested, I have provided some advance briefing for the meeting and will keep these opening comments short.
The State's public finances moved further along the pathway to sustainability in 2015 and, in that context, the Department's gross expenditure for the year totalled €1.24 billion, some 36% higher than the outturn for 2014. The Department had significant achievements in 2015 in delivering on key policies and programmes. Our overall objectives were to improve the quality of life of citizens and communities to foster economic and social development and to enhance environmental protection. In overall terms, the Department was assigned over 13% of the total Exchequer capital allocation in 2015 towards implementing major housing, water, rural development and other programs. In 2015 several critical areas benefited from increased funding, most notably housing where spend increased by 9% over 2014. Total spending from the vote on the various housing programmes, including the provision of social housing and improvement in regeneration measures amounted to almost €646 million in 2015. Local authorities also self-funded housing programmes from local property tax receipts in the amount of €119 million, bringing the gross spend on housing programmes to €765 million.
This was used to meet housing needs through a range of programmes, including the local authority construction and acquisition programme, the approved housing body programme, leasing and the rental accommodation scheme. In total, the housing needs of 13,375 households were met under our housing programmes in 2015.
As members will be aware, responsibility for the provision of water services transferred from local authorities to Irish Water on 1 January 2014. A sum of €222 million was provided by the Government via the Central Fund for Irish Water to meet its capital expenditure in 2015. This funding helped to progress capital projects set out in the Irish Water capital plan, including key water and wastewater infrastructural projects. In addition, €399 million was provided for Irish Water from the local government fund in 2015 by way of an operational subvention. It funded the allowance of 21,000 litres of free water provided for all children in the State, the cost of capital and domestic water charges at the levels set out in the Water Services Act 2014 and the cost of providing a general subsidy to meet the cost of services to reduce the level of unit charge in line with the provisions of the Act. The water programme expenditure figure in 2015 for the Department also included €94 million for the water conservation grant introduced in that year. As at 30 June 2015, a total of 1.308 million households had registered with Irish Water and were, therefore, eligible to apply for the grant in 2015. The Department of Social Protection which administered the water conservation grant on behalf of the Department of Housing, Planning, Community and Local Government made grant payments totalling just over €89 million in respect of 890,104 applications under the scheme. A small number of residual payments continue to be made to householders who have an entitlement to the 2015 water conservation grant. Capital funding of €16.88 million was also provided under the rural water programme, which included support for the group water scheme sector. In addition, €18.88 million was provided for the sector from the local government fund by way of operational subsidies.
The chapter in the Comptroller and Auditor General's report on the funding of local authorities by central government provides an overview of local authority expenditure and income figures since 2006. It details the range of programmes for which local authorities are responsible and the range of funding sources. Transfers of funding from central government sources to local authorities in 2015 totalled almost €2 billion. The local government fund accounted for 43% of this amount. There was continued change in the operation of the fund in 2015, with the ending of the general purpose grant payments and the introduction of the local property tax, LPT, paid to local authorities through the fund. Some 80% of LPT revenue was retained locally to fund vital public services, while the remaining 20% was redistributed to provide top-up funding for local authorities with a lower local property tax base due to variances in property values across the State. These measures were necessary to create a balanced system of funding across local authorities. Income into the local government fund in 2015 totalled over €1.8 billion, made up of motor tax receipts of €1.1 billion, local property tax revenue of €469 million and a payment from the Exchequer of €241 million. The main payments from the local government fund in 2015 included LPT payments to local authorities of €459 million, a payment of €355 million for the maintenance of non-national roads and public transport to the Department of Transport, Tourism and Sport and a payment to the Exchequer of €481 million, as well as a payment of €399 million as a subvention to Irish Water.
On accountability, as the committee will be aware, under the existing policy and legislative framework, the Local Government Audit Service provides for independent scrutiny of the financial stewardship of local authorities and other local bodies. It audits local government bodies in accordance with a statutory code of audit practice, thereby fostering the highest standards of financial management and public accountability. Where the annual audit has been completed by the local government auditor, the local authority is required to furnish a copy of the audited financial statement and any associated statutory auditor's report to every member of the local authority for his or her consideration at the next practicable council meeting. Scrutiny arrangements for local government were also enhanced in recent years, with the establishment of the National Oversight and Audit Commission, NOAC. The NOAC scrutinises local government performance in fulfilling national, regional and local mandates and value for money where State funds are channelled through local government and supports the development of best practice and enhanced efficiency in the performance of local government functions.
The most significant aspect of the Department's community programme in 2015 involved the commencement of the new social inclusion and community activation programme, SICAP, which was rolled out in April that year and will run until the end of this year. Its aim is to tackle poverty, social exclusion and long-term unemployment through local engagement and partnership between disadvantaged individuals, community organisations, public sector agencies and other stakeholders. SICAP expenditure in the nine month period April to December 2015 was €26.8 million. A total of 36,854 disadvantaged individuals were engaged under SICAP on a one-to-one basis, while 2,506 local community groups were assisted.
Chapter 5 of the Comptroller and Auditor General's annual report for 2015 deals with progress under the land aggregation scheme. The scheme was established in 2010 to support local authorities by alleviating the financial burden in servicing land loans that had been taken out from the Housing Finance Agency for the purpose of acquiring land for social and affordable housing developments. It closed in December 2013. At the time the Department had approved 73 sites, with a total area of 247 ha, for inclusion in the scheme. At the time of the Comptroller and Auditor General's report 67 sites accepted into the scheme had been transferred to the housing agency. As of February 2017, this figure has increased to 71. In 2013, as a consequence of continuing pressure on Exchequer resources at the time and following a review of the scheme carried out in consultation with the Department of Public Expenditure and Reform, it became evident that further expenditure on the scheme in accepting new applications was not sustainable. Accordingly, in December that year local authorities were notified of the ending of the scheme.
The matters to which I have referred illustrate the broad range of programmes and activities for which my Department had responsibility in 2015. I should point out that, with the reconfiguration of Departments when the new Government took office in May 2016, the bulk of the Department's environmental functions transferred to the new Department of Communications, Climate Action and Environment, while a range of rural development functions were transferred to the Department of Arts, Heritage, Regional, Rural and Gaeltacht Affairs.
My colleagues and I will be happy to respond to questions or deal with issues that will emerge in the course of the committee's work today.
Seán Fleming (Laois, Fianna Fail)
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I thank Mr. McCarthy for his contribution. On the figures for Irish Water in 2015, the Comptroller and Auditor General made a separate reference to funding for Irish Water which Mr. McCarthy did not mention. Are the figures for 2015 correct? Mr. McCarthy has said €222 million was provided for capital expenditure, €399 million for operations and by way of a subvention, while €89 million was paid out in conservation grants. That gives a total figure of €710 million.
Seán Fleming (Laois, Fianna Fail)
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Yes. The Comptroller and Auditor General has a paragraph in his report stating that in 2015 an amount of €427 million was transferred directly from the Exchequer in the form of a once-off grant payment to local authorities. It was to allow them to repay borrowings from the Housing Finance Agency that had been used to fund local authority water supply and treatment infrastructure that had since been transferred to Irish Water. In addition to the €700 million or so that went through the Department of Housing, Planning, Community and Local Government in respect of that issue, €427 million was transferred directly by the Exchequer from the Central Fund to local authorities to meet liabilities associated with the assets Irish Water took over, which liabilities were met by the taxpayer. Irish Water received these assets, minus the liabilities of €427 million met by the taxpayer from the Central Fund, in addition to the sum of €710 million that went through the Department of Housing, Planning, Community and Local Government, giving a total payment in 2015 of €1.137 billion. Is that the correct total?
Seán Fleming (Laois, Fianna Fail)
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Yes. We need to clarify the word "reclassification" in order that the public understands what Mr. McCarthy means. The assets transferred, but the liabilities remained with the taxpayer.
Seán Fleming (Laois, Fianna Fail)
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Am I correct when I say that talking about reclassifying liabilities is a nice way of saying the taxpayer paid for those liabilities while the assets went to Irish Water minus the liabilities?
Seán Fleming (Laois, Fianna Fail)
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That is correct. From the point of view of taxpayers, these moneys primarily went through the Department of Housing, Planning, Community and Local Government but also went through central funds that did not go through the Department's Vote. Thankfully, the Comptroller and Auditor General highlighted this issue separately in his remarks this morning. The transfer in respect of Irish Water in 2015, including the conservation grant, was €1.137 billion.
Seán Fleming (Laois, Fianna Fail)
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That is correct. Okay. The opening speakers - Deputies Cassells and MacSharry - have 20 and 15 minutes, respectively. Deputies Catherine Murphy, Cullinane, Connolly and Madigan have also indicated and they will be taken in that order.
Shane Cassells (Meath West, Fianna Fail)
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I thank the Chair. I welcome Mr. John McCarthy and his staff. Mr. McCarthy covered a huge amount in his opening statement. He began by talking about housing so I will start there as well if that is okay. Chapter 5 of the Comptroller and Auditor General's 2015 report relates to progress on land aggregation. In layman's terms, it sets out the progress that is being made with the construction of homes on 73 sites, across 610 acres, that are now in the ownership of the State centrally as opposed to through the local authority system. This mini-NAMA scheme is positive because it gets bad land deals off the books of local councils.
A landbank of 28 acres in the Farganstown area of Navan in my own county of Meath, which had been bought for €22 million, did not make it into the scheme. Meath County Council is now paying interest and principal repayments of €500,000 a year to try to service that debt. The 28-acre site in question is just lying there with no movement on the social housing for which it was purchased. The council could be spending €500,000 a year on front-line services, but instead it has to service its debt in respect of this landbank.
It is positive that 73 sites across Ireland have made it into the scheme. It is pointed out in the Comptroller and Auditor General's report that as of July 2016, no progress had been made with the development of residential housing sites on 84% of the land acquired under the scheme. In July 2016, there was inaction on 84% of landbanks under a scheme that stopped taking in landbanks in December 2013. Progress is being made with 12 of the 73 sites that are involved in this scheme. Some 185 units on seven sites have been approved and a further 180 units on five sites are in train. How many other specific sites will see ground broken in 2017 on foot of the site visits conducted by departmental officials in 2015 and 2016? I do not need to tell Mr. McCarthy that this is the biggest issue that arises at the Joint Committee on Housing, Planning, Community and Local Government. Even though the housing waiting list is the biggest thing that occupies public discourse, there is no movement on 610 acres of land that has been identified for housing. How many plans are in place to make progress with these lands? How quickly will these developments happen? The narrative we hear over and again from county councils is that it is frustrating to make progress with schemes from concept to design to implementation. I ask Mr. McCarthy to spell out to me, as succinctly as possible, how many of these sites will see progress in the coming year.
Mr. John McCarthy:
I thank the Deputy. As it stands, there are 15 sites, involving just over 25 ha and 479 units of accommodation, at various stages in our construction pipeline. At another four sites, involving 3.95 ha and approximately 180 units, projects are at an earlier stage of consideration and have not entered the pipeline. A small number of pieces of other land have been used for education and other purposes. I will try to put this into context for the Deputy. This scheme was introduced for the very valid purpose of recognising the difficulties faced by local authorities in the aftermath of the economic collapse. Now that 73 sites have been transferred into the scheme, and with two land transfers still to be formally effected, the focus has switched from the acceptance of sites to the management and utilisation of sites. The Housing Agency has been tasked under Rebuilding Ireland with the production of a site management plan for each site, apart from the sites to which I have referred, in conjunction with the relevant local authorities. Our objective is to try to bring as many as possible of these sites into active use as early as we can. We intend to use the additional funding that is now available under Rebuilding Ireland. I hope the number of these sites being used will increase quickly over the coming years.
Shane Cassells (Meath West, Fianna Fail)
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Why were there delays from 2014 until 2016, given that the scheme closed in December 2013?
Shane Cassells (Meath West, Fianna Fail)
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I presume the councils that acquired these landbanks did so for the purpose of providing housing. They would have had conceptual schemes or detailed schemes in place for these landbanks at the time of their acquisition under this scheme. Given the seriousness of the situation, why has there been a three-year delay with the progress of these sites?
Mr. John McCarthy:
Ultimately, the use of these sites is significantly determined by the availability of resources for supporting projects on those sites. Capital funding started to become available at the end of 2015 and into 2016. It is now available and it will be available in significantly greater amounts over the coming years.
Shane Cassells (Meath West, Fianna Fail)
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Okay. Can I ask a straight question on these sites? Is the Department reticent to develop council estates again? Does the Housing Agency have an ideological issue with the construction of State-owned county council estates of approximately 200 houses? I am asking Mr. McCarthy whether such an ideological barrier exists on the part of the Department or of the Housing Agency. Some of the finest and best constructed estates that were built in my home town were county council estates. Is that day gone now, from the Department's point of view? Is an ideological barrier preventing the development of pure county council housing estates of 200 homes?
Shane Cassells (Meath West, Fianna Fail)
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What does that mean?
Mr. John McCarthy:
It means we are trying to achieve as balanced a mix of housing tenures as can possibly be achieved in local contexts. If a local authority presents us with a project involving the development of a large number of units in a single development, we are more likely to look on it more favourably if there is no existing social housing in the area. There is a very positive disposition towards moving forward with social housing projects. The social housing project pipeline between local authorities and approved housing bodies has more than 500 projects in it. We have to deal with them case by case. There are schemes of 30, 40, 50 or even more units in the pipeline, depending on the circumstances in the individual location.
Shane Cassells (Meath West, Fianna Fail)
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Okay. I am asking whether the day of council housing estates has gone, from the Department's point of view.
Shane Cassells (Meath West, Fianna Fail)
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I know, but-----
Shane Cassells (Meath West, Fianna Fail)
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Okay. Will we see council estates constructed on the landbanks that are now under the remit of the Department, having been acquired under the land aggregation scheme? How will the landbanks be progressed?
Mr. John McCarthy:
I expect that in the majority of cases, they will be progressed for council housing estates. Some larger sites might come forward for mixed tenure, with both public and private housing, in line with the policy objective under Rebuilding Ireland. The key objective is to use them for housing purposes and primarily for social housing purposes.
Shane Cassells (Meath West, Fianna Fail)
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The 28-acre site in my home town is draining resources out of the council.
Is the Department prepared to fund that scheme as an actual housing estate? There are 28 acres there. That would provide a very good amount of houses for the 1,500 people on the housing waiting list in my town and the 5,000 people that are on a housing waiting list in County Meath.
Mr. John McCarthy:
The Department is absolutely committed to and actively engaging with all local authorities to try to bring forward as many social housing projects as our resources can accommodate. Going back to the pipeline of projects that I referred to, there are more than 500 projects in it involving more than 8,500 social housing units. There is an absolute drive and commitment and a very proactive engagement with individual local authorities. I am not familiar with the detail of the specific case mentioned by the Deputy. However, I can certainly say that-----
Shane Cassells (Meath West, Fianna Fail)
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The Department has owned it for more than ten years. It is still green grass. Very quickly----
Shane Cassells (Meath West, Fianna Fail)
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It has. The funny thing about it is - this is an issue for all Deputies - that there is no abundance of publicly-owned lands within councils. That is one of the biggest problems. In County Meath, that is the only piece of land of a substantial nature that is in public ownership for social housing in a county of 180,000 people. That 28 acres is the only piece of publicly-owned land in a county next door to Dublin in a housing crisis and there is no movement on it. In terms of actually addressing the housing crisis, there is nothing happening in the county with the greatest commuting population.
On the issue of the 73 sites, I ask that the technicality around the assets be explained. The assets have a nil value and a nought on the accounts of the housing agency and of the Department. Can the witness explain that to me?
Shane Cassells (Meath West, Fianna Fail)
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Okay. How come the agency does not record that it has an asset?
Shane Cassells (Meath West, Fianna Fail)
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The agency is recording these lands as an asset. There are 610 acres.
Mr. John McCarthy:
They are not recorded in either the Department's accounts or the housing agency's accounts at the moment. We have sought legal advice as to what the appropriate space is, one or the other, in which they should be accounted for. There will be an issue around how they are actually valued. Going back to my earlier point, these sites were not acquired for commercial resale purposes. Their value is attached to their capacity to be used for social housing purposes.
Shane Cassells (Meath West, Fianna Fail)
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I hope so. Moving on to chapter four on the funding of local government, one of the things that really frustrates people is how their money is spent. It is not the payment of tax, rather how it is spent. Ask any resident in this country who pays property tax their view on what they expected to get, what they thought they would get and what they actually got. I know the value of the service of local government. I spent 17 years on a council. The reason I ask is because when the precursor to the LPT, the household charge, was introduced, every single house in this country received a glossy leaflet through the door encouraging them to pay the €100, as it was at that time. In bulletpoint form, it set out where that money was going. There were references to parks, community facilities and estate maintenance. Those were the bulletpoints highlighted to encourage people to pay this charge when the county councils were collecting it. Of course, we saw what happened. They did not collect it.
People in most towns have no parks and have to pay another €100 on top of their LPT to their local residents' association to pay for the cutting of grass in their estate. Ask those people what their memory is of the promise on that leaflet. When the LPT comes in and the collection is the guts of 100% - we had Mr. Cody before the committee from Revenue, which is doing a fine job in that respect as it brings in nearly €500 million a year - one would think that local government would be enhanced rather than impoverished. One would think that it would be able to provide the services that were mentioned in that leaflet some years ago. One would think it would make the critical difference in providing the type of community facilities on the ground level that would actually make a difference, as opposed to maintaining the nuts, bolts and wages of just keeping the county councils on the go.
Low and behold, when we looked at those budgets the year the LPT was introduced, most councils were no better off. They were no worse off, but they were no better off. The general purpose grant, as the witness outlined, disappeared. The LPT, which the households were paying themselves, just subbed in for it. Residents were wondering where their LPT is going. We could only say that it was going into the income side of things. There was no scenario in which county councils actually had more money because what was given with one hand was taken away with another.
As we can see in the figures, funding to councils in this country went down by 70% in that period from 2007 to 2014. Even leaving aside the transfer of powers in some aspects, it is massively underfunded. Can the witness understand people's frustration and can he explain that little movement to me? When the LPT came in, we were no better off in providing the services that people expect and require in this country.
Mr. John McCarthy:
In response to the first question, I can certainly understand the frustrations of the public generally in terms of its wish to have services delivered in an efficient way that delivers for local communities. I absolutely understand that. With regard to the move from the old general purpose grants to the LPT, the policy position adopted was that no local authority should end up being worse off in the transition. The approach taken in order to achieve that was that each local authority would retain 80% of the LPT collected in its area locally and the balance of 20% would be used in order to achieve that equalisation function to ensure that no local authority would be worse off. What that has meant is that some local authorities made the transition on an equal basis. They lost nothing and gained nothing. There were a number of local authorities, from memory it may have been nine or ten, that had strong LPT bases and made significant gains in income. The policy position that-----
Shane Cassells (Meath West, Fianna Fail)
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They were then taken away through the removal of financing for houses and roads and through councils having to then self-finance. Those aspects came out of the surplus from the LPT.
Shane Cassells (Meath West, Fianna Fail)
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Exactly. What was given with one hand was taken away with the other.
Mr. John McCarthy:
Sorry, I just wish to clarify and give the full picture. There were certain local authorities that did end up in a surplus situation even after the self-funding of certain programmes. There is the other dimension that is available to all local authorities and is used in varying ways. Even the evolution of houses used is interesting over the last few years, in that the capacity to either increase or decrease the LPT by 15% is available to individual councils as well.
Shane Cassells (Meath West, Fianna Fail)
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My question was about central funding. We had central funding for county councils to provide services. The people are now effectively paying the funding for that aspect and the general purpose grant was taken away. I ask the witness to address that point for me. If that sleight of hand had not taken place, we would have had local surplus. Most of the things we discuss here are in terms of policy direction, but at the ground level, county councils provide services that make differences to people's lives. Had that funding strand stayed in place, those county councils would have been enriched to really make a difference.
On top of that, the abolition of the town council system by which there were specific urban funds has left a growing scenario in which the focus on urban Ireland is being taken away. The funds being directed into the major towns are no longer there because of the fact that we do not have dedicated budgets for towns. There is a diminution of the democratic system in this country.
We have gone from 114 councils in this country to 31 and the special focus on towns has been taken away. I know it is something we will address but can we get back to the point of central funding being substituted with the local property tax?
Mr. John McCarthy:
The transition from the old funding regime to local property tax, LPT, took place within the context of the overall public finances. In a large measure, although not fully, the introduction of LPT was public funding that was previously funded through general central taxation being replaced by a new form of taxation called LPT with greater connectivity between where money was raised and how it was spent and with a capacity for local councils to make some variations. Those amounted to a 15% increase or decrease and allowed greater local discretion.
Shane Cassells (Meath West, Fianna Fail)
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I hear what Mr. McCarthy is saying but he is not addressing my central point. If the general purpose grant had stayed in place, county councils across the country would have been able to achieve a higher level of services and made a meaningful difference to people's lives as they would have had those strands of funding available to do what people expect. That is as opposed to the nuts and bolts of paying wages.
Shane Cassells (Meath West, Fianna Fail)
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I know that, but as the Chairman has pointed out, €399 million has gone from the operational subvention of the local government fund to Irish Water.
Shane Cassells (Meath West, Fianna Fail)
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On the commercial rates issue, a man came to my office on Monday who is not much older than me and who operates a new business. In one hand he had a bill for €5,000 for his business rates, which he received in January, while in the other hand he had a court order for an appearance in approximately three weeks. It was served on him by the county council because of his rates arrears. It is an archaic system. This man operates a business that helps children with autism and youth federations. It is a good business but he is getting screwed because of the physical size of the premises from which he operates. We have people operating information technology businesses from their attic who make big money but this archaic system is penalising people like this.
In 2017, the commercial rates system will bring in €1.5 billion to local government, which is 34% of the budget and a 10% increase in the value collected since 2010. In my time on the council, we got to a system where if there was a shortfall, the council increased rates. Councils get into the mindset of seeing expenditure as X with income as Y, leading to a shortfall, so they put up the rates. It is an archaic system that is screwing small businesses in this country. Valuation is being discussed currently and I saw on the front of the Westmeath Examinersome weeks ago that 40% of businesses were seeing a rates hike as a result of valuation. Will the witness address that for me? How will this be dealt with in a substantial way by the Department? This simply cannot continue as there is pressure and expectation being put on businesses in this country to fund local government.
Mr. John McCarthy:
Over the past number of years, local authorities were asked and pretty much exclusively responded to a request to keep their annual rate and valuation unchanged, so much of the increase in rates revenue being collected seen in more recent times is down to two factors. The first is an element of economic buoyance and the second is better collection on the part of local authorities. The performance of local authorities in collecting rates was discussed by this committee previously. The major contributing factors for increased revenue arose from better collection and economic buoyance rather than increases in the annual rate on valuation, ARV.
The Deputy raised the issue of revaluation. The purpose of a revaluation exercise is to try to ensure the valuation system is as up to date as possible and the rates revenue collected by local authorities is spread across businesses in the way it should be. It is important to note the standard practice that, as part of any revaluation exercise, a local authority does not gain financially.
Shane Cassells (Meath West, Fianna Fail)
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I am well aware of that.
Shane Cassells (Meath West, Fianna Fail)
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This goes back to how we view local government. We are placing this pressure on small businesses in this country and councillors are forced into a position because of the terrible lack of central funding. The small businesses are picking up the bill for the provision of services in this country. Ordinary householders have paid a local property tax and thought they would get a better service but the general purpose grant was taken away. Nobody is ending up any better and in many instances, people are worse off.
My final questions relate to staff numbers. Since 2008, we have seen staff numbers across councils fall by approximately 25%, from 37,500 to 28,000. In my own county, with 180,000 living there, we have one of the lowest staff to population ratios in the country. How will this be addressed in coming years? How will the required staff be recruited for the provision of services? If we ask any county council member or member of the general public about the provision of community facilities, we know the staff are simply not there. Could I have a general comment on that?
Mr. John McCarthy:
Certainly. I can put the figures in context and the Deputy knows them well in his own area. In the middle of 2008, when the economy started to decline, the whole-time equivalent numbers across the local authority system were just over 37,000. At their lowest point, the figure was at 26,500, so it was a huge reduction in staff numbers. I suppose the system delivered considerable efficiency through a range of initiatives in order to be able to try to continue to deliver the range of services despite all of that. Staff numbers have now started to increase in local authorities and particularly in the housing area we have sanctioned a very significant number of posts in order to allow authorities support the delivery of their housing programmes. We have also made provision within the housing capital programme for certain staff costs to be funded through the capital programme as a means of trying to assist them financially.
Shane Cassells (Meath West, Fianna Fail)
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What is happening within the Department in terms of expediting housing schemes from councils, from concept to design to delivery?
Mr. John McCarthy:
We manage the social housing approval process within the terms of the Department of Public Expenditure and Reform's requirements. We did considerable work in the early part of 2016 and we reduced the process to four stages. We also introduced a one stage approval process for social housing projects up to €2 million in value or 15 units in order to try to ensure we are absolutely delivering as efficiently as we can. We have reviewed it again in the past couple of months and identified a number of further measures that we will look to take, particularly over the second quarter of this year. One of these measures considers whether we can de-risk further the one stage process for local authorities so they can avail of it in the coming months and get on with it. With regard to the projects that still need to come through the four stage process, we are looking at how we can between ourselves and the local government system agree target timeframes for each of us in playing our part in moving on the process.
Just to conclude on that, I will go back to the pipeline maybe. If the Deputy looks at how the social housing project pipeline has evolved over the course of 2016, I think he will see in terms of the 500 projects that are now in it, with 8,500 units, there has been very significant progress in terms of progressing projects through the system.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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I thank the witnesses for coming in and for the presentation.
I have some questions on local government borrowing. Is it correct that the cumulative amount owed by local authorities would be in the region of €4 billion?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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That is fine. Would the terms and conditions of those loans be as I might negotiate myself, that is, that they are paying normal retail rates to commercial lenders throughout the country? Would that be fair to say?
Mr. John McCarthy:
No. I will just check on the figures, but of that €4 billion, approximately €3.6 billion of that is borrowing that is funded through the Housing Finance Agency. The Housing Finance Agency, in turn, largely utilises the NTMA as its borrowing vehicle. The bulk of that funding would be available at very competitive rates. For example, the typical interest rate that is charged on HFA borrowings at the moment - the sort of standard non-mortgage variable rate - is about 1.5%.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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What about the other €400 million?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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Would we not seek to do that through the NTMA as well?
Mr. John McCarthy:
The priority is to do it through the HFA. Local authorities have discretion, if they so choose for whatever reason, to fund borrowing through other vehicles. It is open to them to do that, but our priority is to try to ensure that the bulk of the borrowing - as I said 90% of €4 billion - is through the HFA.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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Are there any views within the Department that it would like to see that moved exclusively to - while perhaps not the HFA - the NTMA directly or some other entity that would ensure that all borrowing was done on a centralised basis on the best possible terms?
Mr. John McCarthy:
This would be expected through the audit committees of local authorities and indeed through the audit process. If there was a situation where a local authority had borrowed for a particular purpose and was paying a particular rate and there were more competitive and attractive rates available through the HFA, or otherwise, certainly the expectation would be that borrowing would be undertaken at the most competitive rates depending on the term of the borrowing that might be required, etc.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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Of course, but the option is still open to local authorities if they want money and it is not coming from the HFA and related to that. If Meath County Council wanted €10 million it is up to it to ask AIB what its best offer is.
Mr. John McCarthy:
The Deputy must also bear in mind that the HFA has a particular state aid clearance for borrowing because it is a State entity. That is primarily in relation to housing and water-related infrastructure, so it does not have a capacity to lend in certain areas and local authorities would need to-----
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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My question initially was: is there any move in the Department, or is it Mr. McCarthy's view or would he undertake measures to try to have all borrowing for local authorities done by a vehicle that would ensure that instead of paying 8% commercially they might be closer to the 1.5% he mentioned if, for example, Meath County Council wanted to borrow €10 million to develop a park in the centre of Navan?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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I am talking about-----
Mr. John McCarthy:
The priority is to ensure that local authorities, for that balance of borrowing that they are undertaking from commercial institutions, are getting the best possible rate. There have been some efforts to look at a more centralised system of that borrowing within the local government sector. It is complicated by the fact that when it comes to pooling resources, and pooling cash balances and borrowings, it can become quite complex in terms of almost getting to the point of needing to have a bank-lending licence. This was looked at some time ago. However, the primary objective should always be to ensure that the best possible rate is obtained. If the local government sector has a way of achieving that which can be achieved better through a more central arrangement, we would happily engage with the system in relation to that.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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I know the Department would engage, but I am asking if it would proactively suggest through what was the county managers association or whatever normal liaison forum it has that it would seek to do that because inevitably local authorities seem to be paying punitive rates compared with those available to the HFA or the NTMA. That ultimately eats into the amount discretionary funds available for local authorities. I ask that the Department would do that. Obviously, some local authorities would be affected more than others by funds they had borrowed for matters other than housing finance.
Regarding section 106 of the Local Government Act, what level of scrutiny and oversight is applied if, for example, Waterford City and County Council wanted to borrow €10 million? Whom does it contact? What is the process?
Mr. John McCarthy:
Let me take land borrowing, since historically it would have been one of the more common loan application purposes. When it receives an application for a land borrowing loan, there would be a number of things the Department would look for. The first is: do we have the capacity to sanction it from the point of view of the general Government balance? What I mean by that is that there is a slice of overall sort of borrowing or capital movements generally within the public system that the local authority is allowed to avail of. That requires us to have a system in place to know what capital repayments are happening by local authorities or what other run-down of capital balances is taking place so that we then know what capacity we have to approve additional borrowing and stay within the parameters that have been set for us by the Department of Public Expenditure and Reform. That is one of the first things we would look at.
The second issue that we would look at is to understand the capacity of the local authority to be able to fund the loan. There would be consultation with our local government finance people as part of that exercise.
In relation to a land acquisition loan for housing, in those cases ultimately the State would pay the interest because the way the system worked ten years ago when this was operating was that the interest was in effect rolled up for a period of time and was then recouped to the local authority at the end of the day.
The third issue that the Department would absolutely insist on, in accordance with section 106, is that there would need to be evidence that the borrowing had been authorised by the elected members and that evidence of the resolution passed by the council would have been submitted to us.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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What follow up measures are in place to ensure that purchases made are used for the purpose for which they were purchased? If a local authority bought land for housing after the Department sanctioned the loan and it used it for football fields or recreation, is there any follow-up procedure?
Mr. John McCarthy:
There is conditionality that the loan has to be used for the purpose for which it is obtained. In the case of land loans the State is ultimately recouping the cost to the local authority as part of the housing project. If the local authority used it for another purpose, there would not be a housing proposal coming to us and the local authority would not have the vehicle for recouping the cost.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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I am a little unclear. If the Department sanctioned a local authority to borrow money to buy land for housing and it was not used for that, is there any follow-up or oversight? Are there any penalties, for example, if a local authority borrowed €10 million, bought land for housing and then used it for recreation?
Mr. John McCarthy:
Historically when land was purchased for housing, and if go back to the early years of the noughties, it would have been purchased in the expectation that the land would have been developed within five to seven years. If a proposal had not come forward in five to seven years, the local authority would need to contact the Department because the rolled up interest aspect would have expired and it would have needed to agree either to bring forward a project or to agree a new funding arrangement. If the local authority used it for community purposes for playing fields, the only way in which it could do that is if it had another vehicle for financing it because the vehicle that was in place for it was purely a housing vehicle that would only recoup its costs if a housing project was brought forward on it.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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We have no direct remit over local authorities but the Department has a remit in terms of the local government audit service. How many professional and support staff are assigned to that local government audit service?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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It is not big deal, it is 31 or 32.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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Is the number sufficient?
Mr. John McCarthy:
We are always trying to see whether we have sufficient staff resources everywhere. Certainly, I have not had any indication from the director of audit that the unit needs more people. Within that 34, we have gone through some recruitment during the past 18 months in order to beef up the numbers but I am satisfied that is a------
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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Is the value for money remit of the audit service discretionary?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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I know that, but it is discretionary?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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The audit is the priority. Is the extent of value for money audits dependent on what is left over and what might be available? If that is the case, how does the service select what to scrutinise in terms of value for money?
Mr. John McCarthy:
The local government audit service would have a lead role in terms of identifying the purposes for value for money audits but there is an advisory committee which involves us and the local authority sector also. I have discussed this issue with the new director of audit during the past number of months and she is certainly very mindful of the importance of trying to ensure that the audit process is conducted in a more efficient way so that more resources are freed up in a very targeted way for a particular period of the year to support an enhanced value for money function. That is something we will be working on with the director of audit and her team over the next 12 months to put a more robust value for money programme in place.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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It is pretty discretionary.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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I want to cite a specific example in Galway where 7.8 acres of land in the townland of Kerraun Rahoon, Galway were purchased by Galway City Council in 2008. We have no remit to call in the local authority. Was an application made to borrow money for the purchase of those lands, or is the Secretary General familiar with the case?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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Was an application made by Galway City Council to borrow money for those lands?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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It is 7.8 acres in the townland of Kerraun Rahoon, Galway. The lands were purchased from Sawgrass Properties in late 2008.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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Was that money borrowed through the Housing Finance Agency?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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That was for the purpose of building houses.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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In that process would the Department, under section 106, have asked for valuations?
Mr. John McCarthy:
No. It is important to recognise, and this has been recognised, that section 106 is a very bald provision. It does not specify criteria that need to be taken into account, and that is something that needs to be addressed. We would have relied significantly on the approval by the elected members and confirmation of that from the local authority as satisfying us that the process had gone to the elected members who are responsible in law for approving the borrowing. The valuation issues would have been undertaken as part of that process.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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Some evidence that has come to the committee in this regard suggests that the elected members were not asked to sanction this until such time as the process was agreed and the price was agreed. Would the Secretary General be aware of that?
Mr. John McCarthy:
I have been aware of the papers on this and, in the time available, we have had some engagement with Galway City Council in regard to it just to try to establish the facts. There are two things at play. One is that the purchase of land is an executive function under one provision of the Local Government Act and the raising of borrowing is an elected member function under section 106. In regard to the purchase of the particular site in Galway, while a contract was signed prior to the borrowing approval being secured from the elected members, my understanding is that a specific condition was included in the contract that provided that if the elected members' approval was not achieved within a six-week period, the contract would not be enforceable.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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The practice has become that the executive decides what to borrow, what to buy, it does the deal and if it can be dragged cross the line at a council meeting, we are out the gap. Is that the type of process we have?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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No, and nor am I doing so, but it seems unusual that the origin of land acquisition, housing and so on would not originate with the elected members, as opposed to them engaging in a rubber-stamping exercise. Would the Secretary General be aware, surprised or concerned that the valuations that informed this purchase were prepared by the vendor?
Mr. John McCarthy:
Looking at the papers, there were a number of valuations. The initial valuation was prepared by a firm of professional auctioneers and valuers which it seems was also engaged by the vendor. Certainly, at minimum from a perception point of view, that is not something that looks particularly well, but it is important that there was also an internal valuation done by the council's own professional valuer before the contract to purchase was signed.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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Was the Department aware that these lands were purchased in November 2008 by the council for €10.5 million and then were purchased by the vendor five months earlier for €6.4 million?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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As an example, would that cause concern?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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This was not an increase in valuation. It was an increase in the price.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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A price was paid.
Mr. John McCarthy:
Yes. All I can comment on is the information I have managed to get on the process that the local authority went through. I have no visibility in regard to the prior transaction to which the Deputy referred. I do not know the basis on which, I believe, €6.4 million was the figure-----
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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Yes.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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Would the Department be concerned that the city's internal valuation, presumably by the professional valuers they have on staff, was approximately €2 million higher than the valuation the vendor had provided?
Mr. John McCarthy:
There were a range of valuations in the initial correspondence from the first valuers. While the first valuers were apparently also engaged by the vendor, they were engaged by the local authority for the purpose of providing the initial valuation and they provided a range of valuations on the basis of three different scenarios of what the site could be used for.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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That is right with regard to the number of units, but I am referring to the highest number of units with the maximum return to the council. That internal valuation was €2 million higher than the valuation provided by Rooney Auctioneers and Chartered Surveyors, which is a very reputable and well-known valuer in Galway that does good work. They provided a valuation for the vendor who, presumably seeking to maximise his own personal return for his investment, had a valuation done, let us call it valuation "x". The council's internal valuation - and it was a matter of months before the most recent transaction on those lands - was €2 million higher. Would this be a matter of concern for the Department?
Mr. John McCarthy:
If there was any situation where proper value was not being obtained for the use of public funds, it would certainly be a concern. I will try to explain this because it is about different valuations. Ultimately the final valuation that was done by the internal valuer in Galway City Council, and the basis upon which the borrowing approval was put to the city council, was on the basis that the site would accommodate 97 units. If we look at the range of valuations that were provided initially, at the outset of the process it would have equated to about €9.7 million. It would have been between the second and the third highest valuations. The valuation then done by the internal valuer was on the basis of a figure in excess of €11.1 million, so there was a gap of €1.4 million. From the papers I have seen. it appears to me that before the contract was finalised, and before a price was agreed, there was an updated assessment done around similar transactions in the area and the price was brought back to €10.5 million.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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Would this example not highlight to Mr. McCarthy that there is a need to define a process that is stuck to and overseen?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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I know that I am running out of time and the other members have a lot to say, but it is an interest-only scenario so who is paying the interest on that at the moment?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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From its own resources?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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Is it fair to say that it is coming out of people's services?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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While nothing has been done with the site so far, is it true that it has been considered for Traveller accommodation?
Mr. John McCarthy:
There are a number of things to do with the site. We have received a proposal from the city council to use it for a combination and to use a portion of the site to provide a social housing project and a Traveller accommodation project. We have gone back to the city council on that with regard to the proposal not satisfying value for money criteria. This is largely because it seems the entirety of the land cost was being assigned to the use of only a particular part of the site and that was not appropriate. I believe there is a proposal now from the city council to use the site temporarily for Traveller accommodation purposes and obviously we will engage with the council on that.
Deputies MacSharry and Cassells raised an important point around the land approval process. Over the past three or four years or more, there have been no drawdowns of new land loans, which is no surprise given the landbank that was built up. Our priority over recent years has been to try bringing land into active use through the land aggregation scheme and through other local authority lands once we had the capital resources available to allow us to do that. In 12 months or more, some local authorities, to be able to work ahead and build up their pipeline of future projects, may well need to get into the space in certain types of places of looking at land acquisitions. In the second half of this year the Department will be looking at section 106 and at a broad land borrowing framework for local authorities in order that there is absolute clarity around the responsibilities of the local authority and what criteria need to be specified in legislation. There is a framework that needs to be put in place for the future.
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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Before I hand back, can I formally ask the Secretary General to consider instructing the local government audit service to do a value for money audit on this particular transaction?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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Will Mr. McCarthy have a word in his ear on the basis that it is a pressure now?
Marc MacSharry (Sligo-Leitrim, Fianna Fail)
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I thank Mr. McCarthy.
Catherine Murphy (Kildare North, Social Democrats)
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I want to get it into my head about how things actually happen, for example, in relation to motor tax. I believe that was ring-fenced in 1997 for the local government fund. In fact, many things were bundled together at that point, including the abolition of water charges and property tax at the same time. This was being made into the local government fund and ring-fenced for that. Funds were collected online and at local government offices acting as agents for the motor tax office, the money was transferred to the Department with responsibility for the environment and a general purpose grant was paid out to local authorities. The general purpose grant is gone and the local property tax has been introduced. The money continues to be paid to the Department and some of it goes to Irish Water. Who decides what funding goes to Irish Water and where does the rest of it go?
Mr. John McCarthy:
As Deputy Murphy has rightly said, the local government fund was established in legislation, I believe in 1999. It was established at a time when our Department had responsibility for roads. There was a sort of connection between motor tax going into a fund and roads expenditure going out the other side. That has changed since then, and a lot else has changed.
I will turn to local property tax first. It comes into the fund and goes out to-----
Catherine Murphy (Kildare North, Social Democrats)
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I will deal with that separately. Perhaps Mr. McCarthy would just concentrate on the motor tax fund.
Mr. John McCarthy:
It all goes into the local government fund but historically the motor tax element of the fund would have been used for the general purpose grants, including funding to local authorities for water purposes. That water related funding moved from local authorities in 2013 to 2014, if I have my years correct. In effect, money that had been going to local authorities for water related purposes was redirected to Irish Water when Irish Water took responsibility for water functions. Subsequently, a balance of the general purpose grant that remained was replaced by the local property tax.
Catherine Murphy (Kildare North, Social Democrats)
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What goes into Irish Water now? I believe that €1.1 billion is collected in motor tax and less than that amount goes into Irish Water.
Mr. John McCarthy:
Yes. It might be helpful for Deputy Murphy that I circulated a briefing paper beforehand. I do not know if the Deputy has it or if it can be brought up on the screen. On page six it shows the main income and expenditure lines for the local government fund. If we take 2016, for example, there was-----
Catherine Murphy (Kildare North, Social Democrats)
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What page are we on?
Mr. John McCarthy:
It is on page six.
The income table shows how the motor tax line has evolved since 2013. The subsequent table sets out the main areas of expenditure. The first line of the expenditure table shows that general purpose grants decreased from €640.9 million in 2013 to €281.3 million in 2014. This reflected the move of funding to Irish Water. The general purpose grant was discontinued in 2015 and was replaced by the local property tax, as can be seen in the next line of the table.
Catherine Murphy (Kildare North, Social Democrats)
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The money comes into the Department and a portion of it goes to Irish Water.
Catherine Murphy (Kildare North, Social Democrats)
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The rest of the fund goes to the Exchequer.
Catherine Murphy (Kildare North, Social Democrats)
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The Department does not transfer it directly, or does it?
Catherine Murphy (Kildare North, Social Democrats)
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Right. Okay.
Mr. John McCarthy:
There are various other miscellaneous items. The fourth line sets out the payment to the Exchequer. We have been looking at this issue. As the Deputy has said, the local government fund was a creature of a particular point in time. I think there is a valid case for looking at where various budget lines and income sources are assigned. We are engaged with colleagues in the Departments of Public Expenditure and Reform and Finance on that.
Catherine Murphy (Kildare North, Social Democrats)
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As the amount of time available to me is quite limited, I propose to put a number of questions to which I would like succinct answers. I have some sympathy with a number of the points made by Deputy Cassells about the local property tax. After this tax is collected at local government level, the local authorities that are net contributors transfer money to the Department. They retain 80% of the money and send anything over that to the Department to be redistributed.
Catherine Murphy (Kildare North, Social Democrats)
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Yes, it is.
Catherine Murphy (Kildare North, Social Democrats)
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Okay. They can retain 80%.
Catherine Murphy (Kildare North, Social Democrats)
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The option to reduce is open to some local authorities. Every time there has been a change, it has been a reduction.
Catherine Murphy (Kildare North, Social Democrats)
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Has it not?
Catherine Murphy (Kildare North, Social Democrats)
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Okay. Have any local authorities that are net recipients reduced the tax?
Catherine Murphy (Kildare North, Social Democrats)
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Have any of the net recipients that receive funds when the 20% of moneys that are collected elsewhere are redistributed reduced their local property tax rates in turn?
Catherine Murphy (Kildare North, Social Democrats)
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I would like to ask about how this is determined. Mr. McCarthy has spoken about a surplus situation. This presupposes that everything is equal. There are deficits in some areas with growing populations because appropriate services are not provided to match those populations. Where does the census of population fit into the Department's calculation of the amounts that are deemed to be required to run the services?
Mr. John McCarthy:
The basis on which the distribution is made is based on a starting point at the transition time in 2013-14. The transition operated on the basis that no area would be worse off in the move from the general purpose grant across to the local property tax funding. The Government made a policy decision that local authorities in a surplus situation needed to contribute a certain proportion of that surplus to self-fund project programmes.
Catherine Murphy (Kildare North, Social Democrats)
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Okay. When the census of population kicks in, it will not make any difference.
Catherine Murphy (Kildare North, Social Democrats)
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No. Okay.
Catherine Murphy (Kildare North, Social Democrats)
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The regional planning guidelines are recommending a very large increase in population in County Kildare, where I live. They are factoring in an increase of 83,000 people between now and 2023. However, the calculations for the county will still be made on the basis of it having a surplus. It is considered, based on how these things are calculated, that the additional population will not bring new needs. Will that be the case if nothing else changes?
Catherine Murphy (Kildare North, Social Democrats)
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It has to come out of the 80% of the local property tax.
Catherine Murphy (Kildare North, Social Democrats)
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The level of need was calculated at a point in time. A council area with a growing population will get extra property tax. That is essentially what Mr. McCarthy is telling me.
Catherine Murphy (Kildare North, Social Democrats)
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Yes. The only advantage of a growing population is that the local property tax will bring in some income. The last time I looked at the staffing ratios across the country, I saw that they varied considerably. This point has been made. The lowest staffing ratio is in Meath County Council and the highest is in Kerry County Council. Kerry County Council has nearly double the staff even though there are 30,000 or 40,000 fewer people living there. Meath has a higher population. Kerry has a lower population. The embargo was a blunt instrument. It did not redistribute staff in proportion to the population of Meath. The staffing level is also calculated into the baseline in the funding of services. It is not an equal situation. Is the staffing level factored into the 80% at a point in time or does that deviate?
Catherine Murphy (Kildare North, Social Democrats)
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I will stop Mr. McCarthy there. Areas that are growing in population are worse off. Such an area might not be worse off at a point in time, but it will be worse off as its population grows if its baseline was poor to begin with. An area with an inadequacy of services and an inadequacy of staff was always going to be disadvantaged by virtue of this particular scenario.
Catherine Murphy (Kildare North, Social Democrats)
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The growing areas are worse off because they are compensating for areas that could not be made worse off. I understand there has to be a social transfer. I understand all of that. It is not true to say no area is worse off, as some counties are worse off because they are growing. I would also like to ask about the development contributions that were capped. Councils could only spend what they brought in over a given year because it was part of the general government deficit. Is that still the same situation? Are there funds in hand that cannot be spent?
Mr. John McCarthy:
It is covered by the same issue I mentioned earlier in response to Deputy Cassells. There is a slice of the general Government balance that is assigned to the local government sector and has to remain broadly in a neutral space.
That means that the local government system can only undertake new borrowing or spend down capital balances to the extent that it is matched on the other side. That does not necessarily operate within each local authority. We would go through a process to try to establish the plans of all local authorities and then try to apportion the available space, prioritising matters such as capital investment and housing.
Catherine Murphy (Kildare North, Social Democrats)
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Some of them have money in the bank and they are not allowed to spend it.
Catherine Murphy (Kildare North, Social Democrats)
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Do we know how much it is?
Catherine Murphy (Kildare North, Social Democrats)
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I hope I will get it separately from Mr. McCarthy. In his opening statement, Mr. McCarthy spoke about the 13,375 who had their household needs met under the programme in 2015. I presume some of that would have come from the housing assistance payment, HAP.
Catherine Murphy (Kildare North, Social Democrats)
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It is a recurring cost and it is temporary. Most would be accounted for by long-term leasing and not much by new house builds.
Catherine Murphy (Kildare North, Social Democrats)
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Yes.
Seán Fleming (Laois, Fianna Fail)
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The HAP is the biggest of the lot.
Seán Fleming (Laois, Fianna Fail)
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Is that substantially a transfer of people from rent supplement to housing assistance?
Catherine Murphy (Kildare North, Social Democrats)
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They are not necessarily new because if they are transferred from rent supplement to HAP, they are not new people. It is a new transaction.
Catherine Murphy (Kildare North, Social Democrats)
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The bulk of this is a recurring cost, a temporary, albeit a little more secure, arrangement.
Catherine Murphy (Kildare North, Social Democrats)
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Much of this is like a three card trick, the motor tax fund, Irish Water and property tax. There are more three card tricks in this Department than in any other. It gives the impression that 13,375 people have a permanent housing solution, but that is not necessarily the case. There is a very significant reliance on existing housing stock to satisfy that housing need through the HAP and RAS which are important initiatives to bridge a gap but that is what they are.
Mr. John McCarthy:
If the Deputy looks back in time to 2008, 2009 and 2010, there was a huge oversupply of vacant property in the country. I can recall at the time some commentaries around suggestions that large blocks of accommodation might have to be knocked because there would never be anybody to occupy them. There was a massive shrink in resources and we had to try to match the shrunken pool of resources with the availability of resources and that is how leasing and arrangements of that kind came into effect. HAP is a structured programme to reflect the fact that rent supplement turned into something it was never designed to be. This brings responsibility for all long-term housing needs under the roof of the local authority in a single place.
Catherine Murphy (Kildare North, Social Democrats)
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Some local authorities, and Mr. McCarthy said these are mainly in the big urban centres and commuter belt areas, are allowed to hold on to 80% of their local property tax but they are told that a portion of that 80% must be spent on housing and roads. Is that not correct?
Mr. John McCarthy:
No. A total of 80% is retained locally and that is entirely at discretion. When I talk about self-funding of programmes I refer to eight or nine who have a surplus where in effect in the transition from the old general purpose grant to the local property tax they would have gained significantly. They were allowed to retain a part of that gain, entirely at their own discretion but they must assign a slice of that gain to housing and roads. That is not part of the 80%.
Catherine Murphy (Kildare North, Social Democrats)
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I want to get this clear: at a given time it was decided that they could hold onto 80%. Can they retain more than the 80% if it is spent on roads or housing? I am not clear at all about what Mr. McCarthy is saying.
Catherine Murphy (Kildare North, Social Democrats)
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It is.
Mr. John McCarthy:
A total of 80% is retained locally, and 20% goes into the equalisation fund to fund the less well-resourced local authorities. Those eight or nine that have a surplus can retain the equivalent of 20% of their local property tax, LPT, base. Anything beyond that they must assign to housing and roads programmes, which were previously funded by the Department.
Seán Fleming (Laois, Fianna Fail)
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I would like Mr. McCarthy to clarify one point on HAP. I would like a detailed note on this. HAP is substantially a transfer of people from rent supplement. The 13,000 are not new people and they are not in new houses. When the rent supplement payments were being moved from the Department of Social Protection to the local authorities, county by county, landlords increased the rent for a person in receipt of rent supplement and that was deemed a new application by the Department of Social Protection because it had to reassess the situation. The Department handed that over to the local authority under HAP. Many of the people who went onto HAP are the same who received rent supplement remaining in the same houses but because the rent increased, it was recategorised as HAP. Is Mr. McCarthy with me on this?
Seán Fleming (Laois, Fianna Fail)
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I will ask Mr. McCarthy to give me the details because he said some were new people. Some might have been people who were on rent supplement changing address. The person was in a house on rent supplement, the rent went up, the person left and got a new house and that same person now comes in under HAP. Mr. McCarthy is calling that a new application but it is the same person. Does Mr. McCarthy have information on how many of the 13,375 were not in receipt of rent supplement? How many new people are there and how many new properties are involved? Mr. McCarthy says he has the information and will send it. Does it answer the specific question? A new person is not just the person who changes address, who was on rent supplement and comes in under HAP for the first time. Do Mr. McCarthy's figures capture that?
Seán Fleming (Laois, Fianna Fail)
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What do you call "new"?
Mr. John McCarthy:
As I understand it, they are new people coming in the door who were not on rent supplement before. I will double-check that as the rent supplement transfer figure is related to how we can claim for moneys that would have previously gone to the Department of Social Protection. I will confirm it for the Chairman.
Seán Fleming (Laois, Fianna Fail)
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The witness appears to have a detailed schedule so will he please send it to the committee?
Seán Fleming (Laois, Fianna Fail)
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If we have further questions after we receive that, we will come back to the witness.
David Cullinane (Waterford, Sinn Fein)
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I welcome Mr. McCarthy and his staff. Will he speak to me first about the urban wastewater directive and what it means?
Mr. John McCarthy:
The urban wastewater directive is one of the most significant pieces of European Union legislation in the water space. It required member states, including Ireland Inc., to achieve certain standards of treatment on a phased basis, depending on the size of the urban centres concerned.
David Cullinane (Waterford, Sinn Fein)
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That clarifies what it is. My next question is whether we are in compliance with that directive.
David Cullinane (Waterford, Sinn Fein)
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If the witness says we are the source of infringement proceedings, what does that mean?
David Cullinane (Waterford, Sinn Fein)
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When did that come in?
David Cullinane (Waterford, Sinn Fein)
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The Commission will refer it.
David Cullinane (Waterford, Sinn Fein)
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That could then mean we could be subject to very substantial fines if we lost that case.
David Cullinane (Waterford, Sinn Fein)
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Who is responsible for making sure we are compliant with the directive?
David Cullinane (Waterford, Sinn Fein)
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Who in the State is responsible?
David Cullinane (Waterford, Sinn Fein)
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Yes. In terms of policy, who is responsible?
David Cullinane (Waterford, Sinn Fein)
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Yes but the Department would have a role as well.
David Cullinane (Waterford, Sinn Fein)
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It has a role in making sure we are compliant with EU directives.
David Cullinane (Waterford, Sinn Fein)
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A red flag was raised in 2013 that there was non-compliance. My understanding of how this works is that the Commission will work with member states, make observations and pass comments on what needs to be done to ensure there is compliance. Will the witness talk me through what happened there?
David Cullinane (Waterford, Sinn Fein)
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What number of exchanges took place with the Commission and the Department over a long number of years and from 2013 to now?
David Cullinane (Waterford, Sinn Fein)
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Did the engagements run to hundreds or dozens?
Mr. John McCarthy:
It would not amount to hundreds but there would have been many, both in writing and in meetings. When the process started, the suggestion was we were out of compliance with respect to approximately 80 locations. Over the course of the engagement with the Commission, we were able to satisfy it that we had brought quite a number of locations into compliance, primarily through investment. When it moved from the initial letter of formal notice to reasoned opinion, that opinion only listed 40 areas. There has been a reduction over that period.
David Cullinane (Waterford, Sinn Fein)
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If we go back to 2013, there would have been concerns about 80 locations. The Secretary General is telling me we may have satisfied the Commission about half of those locations. It is still not satisfied because this is going to court.
David Cullinane (Waterford, Sinn Fein)
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What have we not done? What has the Department and Irish Water not done to satisfy compliance? Is it about funding?
David Cullinane (Waterford, Sinn Fein)
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It is about underinvestment in wastewater services. I imagine there would be concerns about pollution-----
David Cullinane (Waterford, Sinn Fein)
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-----and non-compliance with all those measures. Has the Department sought legal advice relating to non-compliance?
David Cullinane (Waterford, Sinn Fein)
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I would have thought it would be advice from the Attorney General.
David Cullinane (Waterford, Sinn Fein)
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Was it her advice that we should be compliant?
David Cullinane (Waterford, Sinn Fein)
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We have to be compliant.
David Cullinane (Waterford, Sinn Fein)
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Legally, we must be compliant. Is that correct?
David Cullinane (Waterford, Sinn Fein)
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From 2013 up to now, we have accepted we are not in compliance. We are now facing court proceedings. Really, we do not have a leg to stand on legally if we are obliged to be in compliance and we are not. What would the legal advice have been other than to say we should be compliant?
Mr. John McCarthy:
I am conscious this will potentially end up in the European Court of Justice so I must be a little careful in what I say. In this directive there were very clear environmental parameters that needed to be delivered. We needed to be able to show, for example, that primary wastewater treatment was in place by a certain time and it had been upgraded to secondary wastewater treatment. It is quite-----
David Cullinane (Waterford, Sinn Fein)
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Has the Department done the following analysis, as I hope it would have done? Has it a cost on what would need to happen for us to be compliant? If that has been done, has it been juxtaposed with possible fines? Has the Department any idea what possible fines we face and if there has been any risk analysis of the cost of the fines that might come down the track if we are not compliant?
Mr. John McCarthy:
Our standard practice in dealing with infringements of this kind is to engage with the Commission and put together a plan designed to bring us into compliance. We did that and it has now been built into Irish Water's investment plan. Within the overall investment plan there is approximately €1.7 billion of capital investment.
David Cullinane (Waterford, Sinn Fein)
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That runs to 2021.
David Cullinane (Waterford, Sinn Fein)
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Is Mr. McCarthy saying he is satisfied that the funding up to 2021 will bring us into compliance with the directive?
David Cullinane (Waterford, Sinn Fein)
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Is it sufficiently funded to 2021 to meet compliance with the directive? It is either "Yes" or "No". It is either funded to meet the directive's requirements or not.
David Cullinane (Waterford, Sinn Fein)
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Mr. McCarthy is telling me it is funded to 2021. I am trying to establish whether the funding is there.
Mr. John McCarthy:
There are two factors. One is whether we have identified the cost and the other is how it is to be funded. The cost is fairly well established at €1.7 billion within the overall €5.5 billion. The Government has certainly subscribed to and supports the Irish Water investment programme but that will be contingent on the resources being available subject to the outcome of decisions that will be made elsewhere around how water services ultimately will be funded.
David Cullinane (Waterford, Sinn Fein)
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Is Mr. McCarthy satisfied we can avoid fines?
David Cullinane (Waterford, Sinn Fein)
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If Mr. McCarthy is the Accounting Officer and the State is in the dock for non-compliance and we are facing fines, I would be a bit concerned that the Department is not sufficiently robust in the position that we are not facing fines. Mr. McCarthy is saying we have at least identified the cost and we have a plan to fund up to 2021. It is a matter for each budget that the funding will be presented but I imagine if we say to the Commission that we have a plan to 2021 and have identified the cost of compliance, it should be able to work with us and there should not be a problem. I am wondering why Mr. McCarthy cannot tell us today that we should not face fines.
Mr. John McCarthy:
The reality is that in the recent past - within the last number of weeks - the Commission obviously has not been satisfied because it has taken the decision to refer us to the European Court of Justice. I cannot sit here and give an absolute guarantee as a result. I can certainly state the scale of what needs to be done is understood.
David Cullinane (Waterford, Sinn Fein)
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Could I paint a scenario? If we end up in court - and we will - and there are fines, Mr. McCarthy will have to account for those fines. I will be asking a different set of questions as to why we have faced those fines.
Mr. John McCarthy:
To deal with the situation, we have understood and painted a very clear picture of the deficiency and how much it is going to cost. We have provided for it in Irish Water's business plan. However, I do not make the decisions with regard to how that plan is going to be funded. That is the only-----
David Cullinane (Waterford, Sinn Fein)
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We will have to see how it unfolds.
Mr. John McCarthy:
Just with regard to fines, we have had experience in Ireland of two cases in which we have been fined previously. One related to an environmental impact assessment directive and the other related to septic tanks. The amounts involved were relatively small. They were in the low single digits of millions of euro by virtue of the fact that in both cases we were nearly in compliance by the time the judgment had been arrived at.
The Deputy's question was whether we have looked at the potential for what fines might be. There is a mechanism set out in the European framework. It takes into account a number of factors. To give an example of other fines with regard to the urban wastewater treatment space, in October 2013, Belgium was ordered to pay a lump sum fine of €10 million and a daily fine of nearly €5,000. In November 2013, Luxembourg was ordered to pay €2 million plus a daily fine of €2,800. In October 2015, Greece was ordered to pay a fixed lump sum of €10 million and a daily fine of €20,000, which is the equivalent of €7.3 million per annum. In June 2016, Portugal was ordered to pay €3 million and a daily payment of €8,000. Each fine is determined by reference to the facts of the individual case, but we have consistently prioritised funding-----
David Cullinane (Waterford, Sinn Fein)
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I thank the witness for that. I want to move on to the second question regarding housing. The witness responded to a question from an Teachta Cassells about the four-stage process in which a local authority applies for funding for social housing and the time it takes for the cheque finally to arrive. My understanding is that the average wait time is about 18 months. That has been a difficulty because there has been some tension between local authorities, CEOs and councils and the Department in terms of money being available, the local authority saying "yes", but the process being very difficult, cumbersome and it taking an awfully long time to draw down the funding.
The witness told us there was a review, which there was. This is the important part. What we need to do is shorten that timeframe down from 18 months. I heard the witness speaking about the changes to a one-stage process for proposals below 15 units and costing less than €2 million or €3 million. The witness might comment on the de-risk element of that. My understanding from local authority CEOs is that the risk is all on the side of the local authority. To stick with the broader issue of the four-stage process, what proposals are in the pipeline at the moment to reduce that timeframe? That is the critical issue here. That is one question on housing.
The second question relates to the acquisition of vacant properties. Does the Department have an analysis of how many vacant properties there are? I understand there are two schemes. One is the repair and leasing scheme. What percentage of vacant properties overall is the Department targeting under that scheme? There is also the Housing Agency acquisition programme. The witness might talk us through what measures are in place. I do not know whether the witness has seen a report from the Simon Community today in which it states the need to make greater use of vacant properties, which I support. There are two issues here: the four-stage process for acquisitions or new builds for local authorities and why it takes so long, and the issue of vacant properties. I ask the witness to address both issues.
Mr. John McCarthy:
Certainly. With regard to the four-stage approval process, there has been a lot of engagement between ourselves and local authorities. I think we each understand the other's frustrations. As an Accounting Officer for what is a very large investment of public funds, I have to be satisfied that we have a system in place that is getting the best value-----
David Cullinane (Waterford, Sinn Fein)
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What are the four stages of the process?
David Cullinane (Waterford, Sinn Fein)
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In terms of each of those processes, the local authority has to get approval from the Department every step of the way. Is that correct?
David Cullinane (Waterford, Sinn Fein)
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Am I correct in saying that it can take 18 months on average? Am I correct in saying that there are still some proposals in the system going back as far as 2013?
Mr. John McCarthy:
They are certainly in our pipeline of projects. There is probably a small number that go back that far. When we put the four-stage general approval framework process in place, it was a reduction from nine stages. We certainly cut a lot out of it and we received Department of Public Expenditure and Reform approval for it. As I said, we introduced the one-stage process. One of the practical issues that arise in the four-stage process is that when project costs move on to the pre-tender stage, they can change. We have to go through a process to understand why they have changed and whether value for money is still being delivered. There can be legitimate reasons they change. However, we have to go through that process in order that they do not-----
David Cullinane (Waterford, Sinn Fein)
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With respect, I understand that the Department has to be satisfied that the process is appropriate and so on. I accept all of that. There has to be a process. To cut to the chase, the witness accepts that the Department and local authorities have accepted that there is a problem and they are trying to resolve it. The Department has carried out a review. Further action may now be put in place. I am trying to establish whether the Department has set targets or whether it is going to set targets to reduce the average timeframe. If it is 18 months and is causing a problem, the solution is obviously to find ways to reduce it on average. What specifically is being proposed?
Mr. John McCarthy:
There are two critical things. One is the setting of targets for the completion of the various stages. We have to be very clear. This is what we have to engage with local authorities about. There is no point in us setting a target and saying that if we get a stage three application in, we will deal with it in two weeks. If the stage three application that comes in is not up to scratch, we are not going to be able to deal with it in two weeks. There has to be an understanding that we will set targets and do everything we can to honour those targets. However, it has to be on the basis of proper documentation.
David Cullinane (Waterford, Sinn Fein)
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I ask the witness to deal with the question of de-risk before the other question.
Mr. John McCarthy:
I believe there is a concern within local authorities that once we sign off on an initial budget as part of the one-stage process and if the local authority encounters unexpected costs, it will be left hanging. We are looking at that and it is one of the recommendations in the most recent review. We are looking with the local authority sector to see if there is a way in which we can build in some element of a contingency factor that in exceptional circumstances would provide an element of comfort to the local authority that it is not going to be left hanging.
David Cullinane (Waterford, Sinn Fein)
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In plain English, does that mean sharing the risk?
David Cullinane (Waterford, Sinn Fein)
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Does the witness see it as sharing?
David Cullinane (Waterford, Sinn Fein)
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I have other topics, but to be fair to the other members I will come back in later.
Seán Fleming (Laois, Fianna Fail)
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Okay. Deputy Connolly is next.
Catherine Connolly (Galway West, Independent)
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Deputy MacSharry raised a very important point. I am a former Galway city councillor. Unfortunately, he finished on a sentence that should perhaps alert us to something. He said, "Will Mr. McCarthy have a word in his ear?" It is an unfortunate choice of phrase because a word in a person's ear has perhaps led to a lot of our problems in Ireland.
I am going to ask a number of questions about staffless libraries, which comes under the Department's remit, about housing, about the land aggregation scheme and so on. I am not sure if the Department is aware of the reality on the ground. Will Mr. McCarthy give the figures as we speak here today of those on the waiting list in Galway city? Does he have those figures at his fingertips?
Catherine Connolly (Galway West, Independent)
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Okay. Let me state what they are, because I attempted to get them from the Department of Housing, Planning, Community and Local Government and it was extremely difficult. As of 30 September 2016, there were 4,720 households. Let me repeat that because I have lost the witness's attention. There were 4,720-----
Catherine Connolly (Galway West, Independent)
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Good. There were 4,720 households, not people, on the waiting list. That means that somewhere between 10,000 and 15,000 people are on the waiting list for a home in Galway city. To give a very practical example of that, I know one particular applicant who is waiting since 2002. In that space of time - 15 years - the city council has never been in a position to offer him a house. I have the up-to-date figures for empty houses for Galway. There are 40 empty houses. With the exception of specific Traveller accommodation, which I will come back to, no reason has been given why three-bedroom, two-bedroom and one-bedroom units are empty.
The Department has come back to us with facts. It has said that units are turned over very quickly and that empty units are a tiny percentage of the total. I acknowledge that the 40 houses are a tiny percentage of the more than 2,000 houses owned by the council in Galway city. Nevertheless, the perception associated with homes being empty is very bad. Will Mr. McCarthy explain why these houses are not turned over in a matter of weeks? They are deemed to be suitable for people to live in, but when residents die or move on, they are suddenly deemed to be unsuitable for allocation. That is my first question. My second question relates to the housing allocation payment. Mr. McCarthy has given a breakdown of the 13,000 figure. Can he confirm that this payment is really the only game in town for the provision of what he has been calling social housing? I do not blame him for using that term because it is Government policy to do so. Is it the case that the housing assistance payment scheme is really the only game in town?
Mr. John McCarthy:
I would not describe it as the only game in town. Our targets for 2017 are to build approximately 2,400 units; to bring 760 void units, possibly including some of the units mentioned by the Deputy, back into use; to make 1,250 acquisitions; to provide 600 leased units; to make 1,000 units available under the rental accommodation scheme; and to provide 15,000 units under the housing assistance payment scheme. While the latter scheme clearly makes a significant contribution, it is not the only game in town. The build programme is-----
Catherine Connolly (Galway West, Independent)
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Is Galway City Council wrong when it tells us that the housing assistance payment scheme is really the only game in town? Is it wrong when it suggests that most of the money provided in the social housing area is going directly into the pockets of landlords through that scheme?
Catherine Connolly (Galway West, Independent)
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Sorry, I have asked whether the city council has given me a wrong interpretation.
Catherine Connolly (Galway West, Independent)
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Yes.
Seán Fleming (Laois, Fianna Fail)
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What year are we talking about?
Seán Fleming (Laois, Fianna Fail)
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That is fine.
Catherine Connolly (Galway West, Independent)
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I thank Mr. McCarthy for that clarification. I do not mean to be parochial when I refer to Galway. We often talk about the crisis in Dublin, but the figures I have mentioned show that there is an absolute crisis in Galway. We will be lucky if 14 direct-build units are completed in Galway city this year. I refer to houses that are being built as part of a scheme of 69 houses in Knocknacarra. Is that not a crisis by any standard? I assume Mr. McCarthy is aware that we have not built a single house since 2009.
Catherine Connolly (Galway West, Independent)
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Good. I will complete my point. I will not cut Mr. McCarthy off when he responds to me. He accepts that no houses have been built since 2009.
Catherine Connolly (Galway West, Independent)
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We will build 14 houses this year if we are lucky. Those are the up-to-date figures. In that context, does Mr. McCarthy think the Department is taking the direct construction of houses in Galway seriously?
Mr. John McCarthy:
We are engaging with all local authorities. It is open to them to come forward with what they consider to be the best blend of measures to meet social housing needs in their areas. They might need to address a big problem with voids. If there is value in the market, they can acquire properties as long as they do so without interfering in the local market in an unfair way. They might think the answer involves building houses. We engage with local authorities.
Catherine Connolly (Galway West, Independent)
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Honestly, I have read the Orwellian jargon. I do not mean that personally. We have heard about the transfer of acres of land to a body in Dublin under the land aggregation scheme.
Catherine Connolly (Galway West, Independent)
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A total of 247 ha of land have been transferred. Is that correct?
Catherine Connolly (Galway West, Independent)
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I ask Mr. McCarthy to bear with me. I am not trying to catch him out. I am trying to use plain and simple English to elucidate the nature of the housing emergency. For a long time, the land aggregation scheme under which 247 ha of land have been transferred remained the third secret of Fatima. Nobody seemed to know about the land aggregation scheme after the decision to transfer land was made. Is it not the case that even though we are in a housing crisis, this land has remained absolutely unused? It has been confirmed today that even though proposals are in train, not one single public house has been built on the land in question. Is that correct?
Catherine Connolly (Galway West, Independent)
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Okay. No house has been completed. No house has been built on the small amount of land in Galway city that was transferred under the land aggregation scheme. Does Mr. McCarthy know how much land is zoned residential in Galway city?
Catherine Connolly (Galway West, Independent)
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Does Mr. McCarthy know how much land owned by the city council is zoned residential?
Catherine Connolly (Galway West, Independent)
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Okay. Does Mr. McCarthy know how much land has been frozen as a result of the proposed N6 project? The frozen residential land to which I refer was bought at similar prices to those mentioned by Deputy MacSharry in the context of another portion of land.
Catherine Connolly (Galway West, Independent)
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Okay. I have been told by the city manager that two thirds of an 18 ha parcel of land, which is owned by the city council and zoned residential, is frozen because of the proposed N6 project. We bought this land at the same prices mentioned by Deputy MacSharry, or perhaps higher. Is the Department aware of this?
Catherine Connolly (Galway West, Independent)
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I am really just elucidating and trying to expose the difficulties. If we do not analyse the problem properly, we cannot possibly have a solution.
Catherine Connolly (Galway West, Independent)
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There are between 10,000 and 15,000 people on the housing waiting list in Galway city. We will not build any houses this year. If we are lucky, we will complete 14, but I do not think we will. Two thirds of a parcel of land that is zoned residential is frozen and cannot be touched. This increases the intensity of the problem. I understand there are difficulties between the Department and the local authority, which wanted 69 houses to go ahead but was not given permission for them. I will not use the few minutes available to me to get into that. I am highlighting what I have been told. If we use the problems in Galway as an illustration of what is happening in the rest of the country, it is not clear that there is a national housing crisis?
Mr. John McCarthy:
There certainly is a national housing crisis in the country as a whole. In 2016, a pot of resources was made available to us for housing purposes. While there was some small carry-over from 2015 into 2016, we used every single euro that was available to us in 2016 to respond to housing issues. The extent to which those issues play out in different local authority areas varies. I am talking from a national perspective. The Deputy talked about transferring what is happening in a local context in Galway into the national context. My point is that the national context sees a pot of resources made available to us. We put a range of schemes in place. We engage proactively with local authorities and approved housing bodies. We use wisely every resource that is available to us.
Catherine Connolly (Galway West, Independent)
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While I do not think there are any mala fides in this regard, I do not accept that there is ongoing proactive planning to address the housing crisis. A great deal of money is going to approved housing bodies. As far as I can see, no money is going to the city council in Galway. Mr. McCarthy can clarify this for me. I said earlier that the housing assistance payment is the only game in town. Am I correct when I say that a single adult in Galway, and presumably in other parts of the country, is given a housing assistance payment of €575, with a discretion of 20%?
Catherine Connolly (Galway West, Independent)
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There is absolutely nowhere in Galway city where a property can be rented for that price.
In reality, €575 is paid directly into the landlord's pocket with a discretionary 20% extra going into his or her pocket. In addition, the tenant will pay the differential rent to the council. He or she will pay the difference between the sum of €575 and the market rent into the landlord's pocket. In fact, the housing assistance payment actively condones cash payments to the landlord or landlady. Does the Secretary General agree?
Mr. John McCarthy:
I would say that the rent limits available, under the housing assistance payment, are the same ones as were increased under the rent supplement scheme back in the middle of last year. That was on foot of analysis done by the Department of Social Protection and approved by Government.
Catherine Connolly (Galway West, Independent)
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I am not arguing about the limits. I am arguing about the effect of the limits and what it actively and legally condones. The €575 plus 20% goes straight into the landlord's bank account. The person must pay the differential rent to the council, and rightly so. In addition, he or she must pay the extra to bring the figure up to the market rent, which is anything between €1,000 and €1,500 in Galway city. Does the Secretary General understand?
Catherine Connolly (Galway West, Independent)
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Does the Secretary General accept that the scheme actively promotes the payment of cash to landlords?
Catherine Connolly (Galway West, Independent)
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Okay.
Catherine Connolly (Galway West, Independent)
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How does a person get a place if he or she does not pay the difference? How can a person get a place in Galway city if he or she does not pay the difference between what is permitted under the scheme and the market rent?
Catherine Connolly (Galway West, Independent)
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Yes.
Catherine Connolly (Galway West, Independent)
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The Secretary General should listen to my reply. The person cannot get a house at market rent unless he or she makes up the difference. Does the Secretary General agree that the housing assistance payment actively promotes that system?
Catherine Connolly (Galway West, Independent)
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That is even more frightening because that means the tenant has to come up with more money. Let us consider the limit of €575. Nobody in Galway can get a place for €575. The Secretary General does not agree with me so I shall move on.
I have a few questions on staffless libraries. Laois County Council has refused to introduce staffless libraries, Dublin does not seem interested in the initiative and Wicklow County Council has deferred its introduction. Has the Department carried out a risk assessment and cost analysis on the price of introducing staffed libraries?
Catherine Connolly (Galway West, Independent)
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It is not my fault but the Chair is looking at me hoping that I shall stop. I want an answer from the Secretary General. Did the Department carry out a cost analysis of this proposal? I have read what the Department has said but the staff members have claimed the opposite. For all intents and purposes, it is staffless libraries but the Secretary General disagrees and that is fine. Did the Department carry out a cost analysis on the technology, cameras etc? Did the Department carry out a safety audit before the initiative was introduced? Did the Department learn from the pilot projects?
Mr. John McCarthy:
As the Deputy will be aware, we have three libraries where we have operated the pilot thus far. We want to extend the pilot in order to be able to learn more from it. In so far as there is learning from the three pilots where it did operate, in Tullamore and Banagher in County Offaly, 28,000 visits took place outside normal hours.
Catherine Connolly (Galway West, Independent)
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I have all of that information. Has the Department carried out a cost analysis on the system? Has the Secretary General figures for us in terms of the cost of introducing this new system?
Catherine Connolly (Galway West, Independent)
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That is okay. Can the Secretary General come back to me?
Catherine Connolly (Galway West, Independent)
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Yes.
Catherine Connolly (Galway West, Independent)
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It is okay. The Secretary General can supply me with the figures.
Catherine Connolly (Galway West, Independent)
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In terms of the Traveller accommodation plan in Galway city, is the Secretary General aware of the up-to-date status of what is happening in Galway?
Catherine Connolly (Galway West, Independent)
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Is it correct that funding has gone back to the Department as result of various councils not using it?
Catherine Connolly (Galway West, Independent)
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What funding for Galway city has been returned and in what year?
Catherine Connolly (Galway West, Independent)
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That is fine.
Catherine Connolly (Galway West, Independent)
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Is the Secretary General aware that the elected members have not passed the Traveller accommodation plan?
Catherine Connolly (Galway West, Independent)
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Has the manager been in contact with the Department on the urgent situation in Galway?
Catherine Connolly (Galway West, Independent)
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Just a minute. This is very serious. The elected members and the manager are together on this matter. The council has not passed the Traveller accommodation plan. The plan has been on the agenda for a year. Has the manager been in contact with the Department on the urgent situation in Galway?
Catherine Connolly (Galway West, Independent)
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That is what I mean. I did not mean the Secretary General, personally.
Catherine Connolly (Galway West, Independent)
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Yes.
Catherine Connolly (Galway West, Independent)
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Yes.
Catherine Connolly (Galway West, Independent)
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The issue has reached crisis point.
Deputy MacSharry raised an issue and the Secretary General said he was asked about value for money. This is not the only instance because I was there and know lots of land was bought. I do not know where the fault lies. I make no allegations and simply am talking about accountability. Huge segments of land were bought by councillors with the best of will in the world to forward plan. The fact it was not used is an indictment on each Government that provided no funding. The term "value for money" is an unfortunate choice of words and the Secretary General might have a word in someone's ear about it. When this matter came to the attention of the Department why did the Secretary General not consider it proactively in terms of value for money? Did that not happen?
Catherine Connolly (Galway West, Independent)
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No.
Catherine Connolly (Galway West, Independent)
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Will there be a timespan in which the Department will complete a report?
Catherine Connolly (Galway West, Independent)
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Yes.
Catherine Connolly (Galway West, Independent)
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That is one thing. Separately, is the Secretary General aware of inquiries into housing in Galway on the inappropriate allocation of houses?
Catherine Connolly (Galway West, Independent)
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All right. Can the Department play an oversight role? In my time a housing inquiry started but I do not know if it ever finished. I am not here to itemise a particular person. I am here for oversight. It was acknowledged that a house was inappropriately allocated separately from the recent stark headlines, which does not do anything for the perception of and confidence in a local system. I can confirm from my time that the housing inquiry commenced. Is the Department aware whether the housing inquiry finished, conclusions were drawn and recommendations were made?
Catherine Connolly (Galway West, Independent)
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There is something seriously wrong somewhere in the oversight of a body where it is accepted that a house was inappropriately allocated by one member of staff to another, who I will not name. A housing inquiry was started by a new city manager. Where is the result? What has been learned? We do not know and now we have more screaming headlines as a result of an inquiry or an issue raised by a Senator in the Seanad.
I support city councils, local authorities and public service as they are absolutely necessary. It is unhelpful when issues are not dealt with swiftly and lessons learned, particularly given the housing crisis.
As such, I ask what oversight and mechanisms are in place. We have a very active local government management organisation, albeit I forget the title, which is functioning all the time. Mr. McCarthy will know the name better than me.
Catherine Connolly (Galway West, Independent)
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Is there no mechanism coming back from that or from the Department to the association to ask what is going on, whether the inquiry has been concluded and what has been learned from it?
Catherine Connolly (Galway West, Independent)
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It is not staffing. It is the inappropriate allocation of a public house.
Catherine Connolly (Galway West, Independent)
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It is from one staff member to another.
Mr. John McCarthy:
In law, the chief executive of the local authority is responsible for all staffing matters within the local authority. If there are issues where a member of staff has not abided by the ethics provisions in the Local Government Act 2001, arrangements are in place through which he or she needs to be dealt with.
Catherine Connolly (Galway West, Independent)
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Please. Mr. McCarthy is obfuscating. I am asking him what role the Department has in overseeing procedures when issues arise. It is not staff here, it is procedure and ethics. The manager confirmed there was a housing inquiry. When did it begin, when did it conclude and what was learned from it? Those are matters for the Department, surely, because it raises questions about all other local authorities.
Catherine Connolly (Galway West, Independent)
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Has that particular one been brought to the Department's attention?
Catherine Connolly (Galway West, Independent)
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I am not talking about the recent allegations. I am talking about going back two years now.
Catherine Connolly (Galway West, Independent)
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My thanks.
Seán Fleming (Laois, Fianna Fail)
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I have one question on the HAP scheme. Following on from what Deputy Connolly said, the essence of what Mr. McCarthy said was that if there is a difference between what is allowed and the extra discretion and if somebody has to pay extra money to get that house, it is a matter between the tenant and the landlord. Is that legal? Does the scheme allow for it?
Seán Fleming (Laois, Fianna Fail)
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It is. Under the rent supplement scheme, the situation was that the Department of Social Protection was not allowed to pay rent supplement in respect of a property which was not coming in at the threshold or ceiling it had set. Is that now gone?
Mr. John McCarthy:
There is a greater element of what one might call choice if one wanted to, albeit that might not be the right word. There is greater discretion available to a householder who is eligible for the HAP scheme to source a particular type of accommodation to which he or she might want to make some contribution also.
Seán Fleming (Laois, Fianna Fail)
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It was not available-----
Seán Fleming (Laois, Fianna Fail)
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In essence, the Deputy is correct that the HAP scheme as opposed to the rent supplement scheme has specific provision for the person who in many cases is on a fixed social welfare payment to find additional money over and above the differential rent and what is being paid by the local authority. Mr. McCarthy calls it flexibility or the exercise of choice, but the possibility of the person having to come up with funding is available under HAP but was not available under rent supplement. Does Mr. McCarthy not then see the point that the Deputy was referring to which was that Mr. McCarthy did not give a clear answer? He is clarifying it now.
Seán Fleming (Laois, Fianna Fail)
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I put it this way to copperfasten what the Deputy asked. The old scheme did not allow these top-up payments by the tenant. The new HAP scheme allows them. The Deputy asked whether Mr. McCarthy thought the new scheme was facilitating these top-up payments and he was neutral on it. He is now saying it is specifically provided for in the scheme.
Seán Fleming (Laois, Fianna Fail)
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It facilitates it.
Seán Fleming (Laois, Fianna Fail)
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We are getting there. The other scheme did not allow or facilitate it. This scheme allows and facilitates it. It may not be actively be promoted but-----
Seán Fleming (Laois, Fianna Fail)
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-----to be clear to the Deputy and those watching it is important to know that the new scheme facilitates and supports that. That is the essential point I want to make on that. Deputy Burke is next, Deputy Madigan having left the meeting.
Peter Burke (Longford-Westmeath, Fine Gael)
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I want to ask about a report in The Irish Timeson 11 January 2011 on a loan Dublin City Council advanced to a State company, Ballymun Regeneration Limited, of €6.6 million. Can the Department spell out whether it is aware of that and the circumstances surrounding it?
Mr. John McCarthy:
Certainly, Deputy. This issue relates to a housing development being undertaken as part of the Ballymun regeneration project. It was a situation where pyrite was found. It goes back to 2007 and 2008. When presented with the situation that arose at the time, we engaged with Ballymun Regeneration Limited on the appropriate response. There were two options which were considered. One was to continue with the existing contract and ask the existing contractor to complete the work and pay for it without any determination of legal liability which would be determined at a later stage. The other was to terminate the contractor's employment and secure someone else to come in and do it. Both of those options were considered from risk and legal perspectives and the choice was ultimately made that the best outcome from the taxpayers' perspective would be to continue the employment of the existing contractor, remedy the work and bring the project to a conclusion. The project was very significantly advanced at that stage. All of the financial, legal and risk factors were taken into account.
Where the issue of a loan came into play was that in wanting to progress the project to completion, we were faced with a situation where there was no legal certainty around where the ultimate liability for the defective material would be placed. We wanted an avenue through which to provide space for the additional public funds that were going to be provided to be recovered in due course, including if the contractor who was engaging in legal proceedings was to get a successful outcome. Even though it is ten years on, those legal proceedings have not yet concluded. There are a whole range of other legal proceedings, and I want to be careful about what I say, ongoing on a similar issue but Dublin City Council or BRL are not involved in those. This was a vehicle with the taxpayers' interests in mind to try to provide an avenue through which moneys could be recovered at a stage down the road, including if the outcome of legal proceedings which are still going on went in a particular direction.
Peter Burke (Longford-Westmeath, Fine Gael)
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I want to be very careful and talk in principle. I do not want to mention any company or legal issue. In principle, is it good practice to loan a company €6.6 million without any recourse to the directors of the company? In other words, if one has a company or a vehicle to which the Department or a local authority decides to loan money on an interest-free basis, what happens if that company goes into liquidation or ceases to trade? What guarantees are there? Is the Department aware of any personal guarantees as security for its money? If this company ceased to exist, how would the Department propose to get its money back?
Mr. John McCarthy:
The decision we made at the time was that the State should step in and provide the funding to remediate and deal with the issue that arose. Over 100 houses were involved which had been very significantly developed and we were potentially looking at a situation where this development could have lain there for God knows how long had it gone down the legal route. As I said, legal proceedings are still going on ten years down the road. There were two dimensions to it. One was to get the project completed. The options for dealing with that were looked at and risk assessed and the particular option that was chosen was determined arising out of that. The other was a parallel vehicle to try to deal with the reality of the uncertainties, legal and otherwise, that existed and at least keep open the options for the State down the road.
Peter Burke (Longford-Westmeath, Fine Gael)
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Is this loan repayable?
Peter Burke (Longford-Westmeath, Fine Gael)
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Does Mr. McCarthy deem it good practice that a local authority would advance a loan to a private company without any guarantee either from directors or from any other personal guarantee to get its money back?
Mr. John McCarthy:
In principle, no. That is not a space that local authorities should ordinarily be in. However, I suppose these were very peculiar and difficult circumstances, shrouded by all sorts of legal uncertainty. Ten years down the road and it is still not resolved. It was a tailored solution taken on the basis of the best legal advice at the time.
Peter Burke (Longford-Westmeath, Fine Gael)
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I will try to move away from the legal issues and the case about which Mr. McCarthy is talking, and focus on the principle that was pursued here. We need to be very careful when spending taxpayers' money. Allowing any local authority to enter into agreements and advance interest free loans of the magnitude that is suggested in this report in The Irish Timesto any company without any recourse or any guarantee is very bad practice on behalf of the Department. What guarantees do we have that this will be repaid?
Peter Burke (Longford-Westmeath, Fine Gael)
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While I am not talking about this case, if someone is into sharp practice in business and a company is wound up, and if any individual, not a Department, advances money to a company structure without any security of guarantees and that company is liquidated and goes out of business, that is it: the money is gone. Does Mr. McCarthy accept that?
Peter Burke (Longford-Westmeath, Fine Gael)
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I understand what Mr. McCarthy is saying, but I would be very concerned that this would be a route that in the modern day environment a Department would go down. I think it is very serious. In addition there is an issue relating to tendering. That is also raised in this article which is now public. No tender process was entered into for this expenditure. That would concern me. Does it concern Mr. McCarthy?
Mr. John McCarthy:
In general, absolutely. Tendering needs to be the norm in order to deliver value for money. That was one of the factors that was considered in the risk assessment that was done. As between the various options and weighing up all the risks associated with different options, continuing the existing contract was the vehicle that was chosen. We got legal advice to establish that was a permissible option in the circumstances.
Peter Burke (Longford-Westmeath, Fine Gael)
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I am very surprised that on foot of a risk assessment we would decide to lend money to a structure that has no security and in addition it did not go out to tender for the money. That is a very poor move by the Department.
Seán Fleming (Laois, Fianna Fail)
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Before we go into the second round, I wish to put a few points to Mr. McCarthy. This is a legacy issue and may not be an issue for the Department of Housing, Planning, Community and Local Government. Some people have still not paid non-principal private residence tax. The answer to a recent parliamentary question indicated that €30 million was collected last year. With fines included it comes to about €7,000 for people who never paid it. That would indicate about 4,000 people paid last year. Where does that €30 million collected last year go? Some people never registered and because they are doing something with property had to regularise their situation.
Seán Fleming (Laois, Fianna Fail)
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It is collected by Revenue. I am told the local authority-----
Seán Fleming (Laois, Fianna Fail)
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I am talking about the second home tax.
Seán Fleming (Laois, Fianna Fail)
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Where is that collected?
Mr. John McCarthy:
Through the local authorities. At this stage €554 million is the total that has been collected under it. The primary vehicle through which it continues to be collected is that to the extent that there is an undischarged liability, it remains a charge on the property so according as properties are sold-----
Seán Fleming (Laois, Fianna Fail)
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I understand that. Who collects it?
Seán Fleming (Laois, Fianna Fail)
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Where does the money go?
Seán Fleming (Laois, Fianna Fail)
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Ms O'Donoghue seems to be indicating my figures are in the correct region. That was an extra €30 million coming into local authorities, which is good, but it is bonus money for them if they get it. Does the Department take into account how much each local authority collects on this?
Seán Fleming (Laois, Fianna Fail)
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Does the Department have a breakdown by local authority?
Seán Fleming (Laois, Fianna Fail)
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Mr. McCarthy will get us a list by local authorities.
Seán Fleming (Laois, Fianna Fail)
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Is it kind of bonus income for the local authorities? If it comes, it comes. It is a windfall gain if they get it.
Seán Fleming (Laois, Fianna Fail)
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It is still being collected at that rate. Given that €35 million is coming in per annum, has anyone in the Department calculated what is out there. It is probably a contingent asset. This phrase has come up about contingent asset - the Social Insurance Fund - but it is now clear to me that there is a stream of income of €30 million to €35 million per annum. That indicated that there is an uncollected amount of money out there. Has the Department done anything to try to estimate how much money might be out there, or does it just sit back with the view that if it lands through the door, it lands through the door? What proactive steps is the Department taking given that €30 million is coming through with no effort from the Department?
Seán Fleming (Laois, Fianna Fail)
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What is it doing to try to collect what is obviously out there?
Mr. John McCarthy:
The way in which the process was brought to a conclusion in 2014, I think, under the legislation was that the penalties were applied to undischarged liabilities and they were increased and frozen in time. The mechanism for picking up those was, in effect, to place a charge on the property and collect it when the properties are sold.
Seán Fleming (Laois, Fianna Fail)
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Is it correct to say there is no mechanism to actively collect any moneys?
Seán Fleming (Laois, Fianna Fail)
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If someone is not selling a property and it stays within the family, it might never come to light even though there is €7,000 due in that case.
Seán Fleming (Laois, Fianna Fail)
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Is Mr. McCarthy happy with it being dealt with in that way? Based on the €30 million last year, we are satisfied that there is money to be collected and is being collected. It is being handed in without anybody asking for it. Should someone in the Department not try to talk to the Revenue Commissioners and compare it with LPT and try to do some matching to see if it is possible to estimate rather than in ten or 15 years' time still getting money that we could do with now if an effort was made to collect it?
Mr. John McCarthy:
I think on the basis of the number of properties in 2013, which was the last charge year, the number of properties subject to the charge was over 400,000. If one looks at that versus, say, the scale of the rental sector at that particular point in time, I think there would be a very high-----
Seán Fleming (Laois, Fianna Fail)
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Some 400,000-----
Seán Fleming (Laois, Fianna Fail)
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----- are paying it.
Mr. John McCarthy:
There were 400,000 properties registered in 2013 in terms of the liability date. In building up that liability, there would have been some data transfer and data matching with the PRTB and with the Revenue Commissioners at the time. I think there would be a reasonable level of confidence that the approximate number of 400,000 is a fairly strong reflection of the potential liability. Then it is the issue of the charging out.
Seán Fleming (Laois, Fianna Fail)
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We will tease that out for a minute. Mr. McCarthy is saying in 2013 we knew that 400,000 houses were liable to pay this.
Seán Fleming (Laois, Fianna Fail)
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How many of those 413,000 paid it?
Seán Fleming (Laois, Fianna Fail)
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The real question is how do we know that €400,000 was a complete figure?
Seán Fleming (Laois, Fianna Fail)
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A complete figure. We do not know and I know that Mr. McCarthy does not know either.
Seán Fleming (Laois, Fianna Fail)
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Okay, here is another question. Out of the 4,000 or 5,000 people who paid last year and who, on their own, yielded €35 million, how many were on the list as being due and how many were new and not known about by the Department?
Seán Fleming (Laois, Fianna Fail)
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Would the Department have that information?
Seán Fleming (Laois, Fianna Fail)
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I will stop on this topic at this point but I want a detailed report on that. I think Mr. McCarthy understands what I am looking for here. There was money coming through and we both know that some of it was never in the Department's system. Some of what was coming through possibly was in the Department's system but the Department should know how many of the 5,000 people who paid last year were people about whom the Department knew nothing. It should know many of them were not on the Department's books in 2013 and how many of the people who were on the books at that time have paid their liabilities in full. That will give us an indication of the outstanding liabilities. The Department is collecting €35 million per year with zero effort on the part of the State. All of the money is coming from conveyancing and solicitors telling people that they have to pay up. It is good that such a mechanism exists but it is not good enough to wait for 40 years for some of that to work through the system. I want to see how the Department can proactively deal with money that is there to be collected but which no effort is being made to collect it. I ask Mr. McCarthy to provide a detailed report on that. I expect that such a report will take a little bit of time but-----
Seán Fleming (Laois, Fianna Fail)
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If you do want to come back at a later date, that is fine. I ask that the Department sends us the information it has and we will have a look at it. My next question is on the tenant purchase scheme. Can local authorities unilaterally, through a valuer, set the value, about which there can be no further discussion or can the tenant get an approved valuer, recognised by the local authority, to provide an alternative valuation? Can negotiations or discussions then take place between the professional valuers? Does the scheme allow for an independent verification of the valuation carried out by the local authority?
Mr. John McCarthy:
We would rely on the local authority to carry out the valuation. As the relevant housing authority, it is for the local authority to determine the purchase price, to calculate, in effect, what the tenant purchaser would have to pay. That said, if there was a dispute, I am sure that the local authority would engage with the prospective purchaser. If there were different valuations, they could be examined, but ultimately the housing authority makes the call.
Seán Fleming (Laois, Fianna Fail)
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I am asking about the rules and regulations, not about what Mr. McCarthy assumes a kind housing finance officer would do.
Seán Fleming (Laois, Fianna Fail)
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The housing authority has the right to set the price unilaterally and it can choose not to negotiate with a reputable valuer. Is that correct?
Mr. John McCarthy:
The regulations set out the basis on which the purchase price is to be calculated. In the main, it is based on the relevant market value of the house, suitably discounted. In other cases, depending on circumstances, it can be based on a formula related to the cost to the housing authority of replacing the house.
Seán Fleming (Laois, Fianna Fail)
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Mr. McCarthy mentioned market value. Can any approved auctioneer give an estimate of the market value or is it solely-----
Seán Fleming (Laois, Fianna Fail)
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Who sets the market value? When the Department issued the circular on the scheme, did it include a provision allowing an independent valuer to submit a valuation to the local authority on behalf of the purchaser? Is that in the scheme or not?
Seán Fleming (Laois, Fianna Fail)
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It is not provided for-----
Seán Fleming (Laois, Fianna Fail)
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It took me a long time to get that answer from Mr. McCarthy.
Seán Fleming (Laois, Fianna Fail)
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Would Mr. McCarthy be aware of any other situation involving the sale of a house where one side has the absolute sole right to set the price and the other side has no right to negotiate on that price? Does he think that is reasonable? Would the Ombudsman stand over that sort of procedure? Does Mr. McCarthy think that is fair?
Seán Fleming (Laois, Fianna Fail)
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I will tell my constituent to take the matter up with the Ombudsman if there is no appeals system in place to deal with it. I believe that this is not good public administration. We will test it; that is all I will say. I thank Mr. McCarthy for clarifying that it is decided by the local authority and not by another valuer.
Mr. McCarthy said that the housing assistance payment, HAP, scheme is costing €152 million out of the €1.3 billion budget for social housing this year. I ask him to send us a note detailing the breakdown of the balance, how much is for approved housing bodies and so forth. I ask him to provide information on the make-up of that €1.3 billion budget. I am sure Mr. McCarthy has it in front of him now but I ask him to send it on to the committee.
My next question is about staffless libraries. The Department ran a number of pilot schemes. Was the staffless libraries initiative rolled out in other areas before the pilot schemes were fully assessed and completed? If a local authority wants to refurbish a library or build a new one, is funding only provided on condition that it enables the library to be staffless? The authority may not proceed with the staffless library option, but is it a requirement that the technology be installed to allow for this, with 25% of the funding for the technology to be provided by the local authority? Is that part of the Department's library scheme? Is it requiring that all refurbished or new libraries must be staffless library enabled?
Seán Fleming (Laois, Fianna Fail)
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In general. What does that mean?
Seán Fleming (Laois, Fianna Fail)
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In other words, if the local authorities do not make their libraries enabled for the staffless system, they will not get funding. That is fine. I just wanted clarification on that because I understood that to be the case.
I have a question on the Housing and Sustainable Communities Agency. Is that a company? Does it have separate audited accounts? Mr. McCarthy is the Accounting Officer for the Department. When were the last audited accounts produced for that organisation?
Seán Fleming (Laois, Fianna Fail)
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Yes, but Mr. McCarthy is the Accounting Officer for the Department so I am asking him first. I will ask the Comptroller and Auditor General when he last audited the accounts but I am asking Mr. McCarthy when he approved them.
Seán Fleming (Laois, Fianna Fail)
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Does the Comptroller and Auditor General know if they were laid before the Houses?
Seán Fleming (Laois, Fianna Fail)
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I would like-----
Seán Fleming (Laois, Fianna Fail)
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The total outstanding principal on loans under the land aggregation scheme is €468 million. Is the €468 million, the principal outstanding, recorded on the State's balance sheet? I am reading the first paragraph-----
Seán Fleming (Laois, Fianna Fail)
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So they are on the State's balance sheet.
Seán Fleming (Laois, Fianna Fail)
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Are the assets included on the State's balance sheet?
Mr. John McCarthy:
We are still discussing the land aggregation scheme assets and are taking advice from the Chief State Solicitor's Office as to where they reside. However, in terms of lands that have not been accepted into the land aggregation scheme, both the asset and the liability associated with them would be on the local authority's balance sheet.
Seán Fleming (Laois, Fianna Fail)
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In terms of those that have been accepted into the scheme, the asset is still on the local authority's balance sheet. Is that correct?
Seán Fleming (Laois, Fianna Fail)
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The Housing Agency was placed on a statutory footing in 2012. Is Mr. McCarthy telling me that five years later, there is still a legal debate about how items are recorded on its balance sheet?
Mr. Seamus McCarthy:
Yes, as the lands were transferring across we queried with the Housing and Sustainable Communities Agency the fact it was not recognising them as assets on its balance sheet at current market value when it acquired them. The agency said that it did not control the lands and, therefore, they were not assets. The agency is holding them in trust for the Department. There is an anomaly there.
Seán Fleming (Laois, Fianna Fail)
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We are tripping up on this. Mr. John McCarthy is the Accounting Officer and I want him to provide a detailed note of the situation with regard to the assets and liabilities of the Housing and Sustainable Communities Agency. I ask him to send us on a note because five years after the agency was established, it is extraordinary that we are having such a discussion at this point. Leaving aside the Comptroller and Auditor General, the primary responsibility to produce the accounts lies with the company. The Comptroller and Auditor General is only the auditor.
There is a board of directors and it is its responsibility to know those things in the first place. The Comptroller and Auditor General will audit it after they have signed off their accounts. I ask for a note on that and on the uncollected non-principal private residence issue we mentioned.
I have a last topic to mention. I apologise, but these are all specific issues that have crossed my desk as a Deputy. I put down a parliamentary question on this last year and Mr. McCarthy might have seen correspondence from me on it. It relates to the local authority mortgage protection insurance scheme. In my constituency - and this is reflected everywhere - the cost of the local authority mortgage protection insurance scheme, which every person with a housing loan must join, is three or four times more expensive than what is available in the private market to people who do not have their loans with a local authority. It is not 2% or even 30% more expensive, it is 300% to 400% more expensive. In the private market, it was made illegal years ago for the mortgage provider to force the mortgage holder to take out mortgage protection insurance with that company. Customers are free to shop around. Seemingly, what is good for 85% of the population does not seem to be good enough for those who have loans from the local authority. They are still being obliged legally to have mortgage protection insurance with the scheme.
That is a point but the real point is that it is several hundred percent dearer than what is available in the private sector. When people run into arrears and one seeks to negotiate with a finance officer, one sees what looks like a phenomenal amount of mortgage protection insurance compared to what one deals with where a person owes money to a bank. It is utterly unfair. I know Mr. McCarthy will tell me there is extra coverage, that it covers a person until he or she is 65 and that if he or she dies, he or she gets €3,000 extra. I know what the benefits are from the reply to the parliamentary question and correspondence from the Housing Finance Agency. The most recent reply I received from the Minister last year stated that as part of the upcoming retendering process, the relevant committee would seek to secure with effect from 1 January 2017 the most appropriate insurance cover at the best value for money for local authority borrowers. I ask Mr. McCarthy to provide the committee with a detailed assessment of the improvements made to the scheme which were achieved on 1 January 2017.
I have asked the Department to give me the detail of how much money has been collected in the scheme and how much has been paid out. That has not been provided. The Department said it was not its affair. I have written to the Housing Finance Agency which says it does not have the information either. I have written to the local government managers' association or whatever the group involved is and it said it did not have the information. I am told the mortgage protection insurance scheme protection committee cannot provide it. It is a sub-committee of the City and County Management Association which cannot provide me with the information. The local authorities obviously do not have it and the Housing Finance Agency has not been able to provide that information. The Department is on that also. Despite PQs, the Department cannot provide this information. What is the total amount paid by local authority mortgage holders for mortgage protection insurance for each of the last couple of years and what payouts have been made? They are being severely penalised because they have nowhere to go. If they get a loan from the agency, they are forced to get this insurance. It is not fair.
The Department says the current underwriter is Generali PanEurope with Marsh Ireland acting as its insurance administrator. The PQ reply says that financial information specific to the operation of the local authority MPI project is commercially sensitive. We want to lift that veil of commercial sensitivity. The Department knows what I am looking for. I do not accept the answer I was given. How many people have local authority mortgages in the country under regular mortgages and shared-ownership mortgages schemes, approximately? Somebody across from me must know. How many local authority mortgages are out there?
Seán Fleming (Laois, Fianna Fail)
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Mr. McCarthy will understand that I have gone to the four groups of people involved in administering this one. None of them has it. None of them will provide it. I think there is a conspiracy for nobody to have it in case somebody can find out about it. Somebody must know if it is 10,000, 20,000 or 30,000.
Seán Fleming (Laois, Fianna Fail)
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There are 17,700 people with local authority mortgages. They would not have mortgages from local authorities if they were better off, in which case they would have got their mortgages from a bank. Those 17,700 people are paying by far the most expensive mortgage protection insurance in the country, by a mile. In their interests, I want information on this. Mr. McCarthy might say it is not in the Department's Vote, but he is the Accounting Officer for the Department to which all those bodies are in some way connected. He is the man I can ask to get the answer. Is he familiar with what I am talking about?
Seán Fleming (Laois, Fianna Fail)
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Can he understand our frustration and explain why this is whole topic is so shrouded?
Mr. John McCarthy:
I will come back to the Chairman with a note on it, but it is most likely around the commercial sensitivity at the time when a procurement process was retendered. Whether that is now off the pitch and whether there is information we can get from the local government sector which does not prejudice any future thing is something I will look into to see what we can come back to the committee on.
Seán Fleming (Laois, Fianna Fail)
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They are a few of the bits and pieces that have come across my desk as a Deputy and to which I have not been able to get answers through the sources set out. As such, I am asking Mr. McCarthy directly today.
David Cullinane (Waterford, Sinn Fein)
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I want to come back to a number of issues I raised earlier and put a different slant or angle on some of the issues. We spoke earlier about funding for housing provision and it was more in the context of trying to speed up the procurement process and the allocation of funds from the Department or housing agency to local authorities. We have dealt with that. Obviously, a substantial issue is the funding itself. Will Mr. McCarthy give me a breakdown of the total capital funding made available for social and affordable housing to local authorities over the last four or five years?
David Cullinane (Waterford, Sinn Fein)
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To whenever Mr. McCarthy can.
David Cullinane (Waterford, Sinn Fein)
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There has been an increase but it is coming from a very low base.
David Cullinane (Waterford, Sinn Fein)
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We now have the housing action plan in which there are a number of proposals. I am trying to establish whether they are being utilised, the level of support there is for them in the Department and the level of uptake in local authorities. There was a proposal that local authorities could borrow to build or acquire properties. Is that correct?
David Cullinane (Waterford, Sinn Fein)
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Was there a proposal in the action plan that they might be able to borrow?
David Cullinane (Waterford, Sinn Fein)
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Is Mr. McCarthy sure?
David Cullinane (Waterford, Sinn Fein)
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There is a proposal to have a non-Government borrowing fund. For example, it would be money from-----
David Cullinane (Waterford, Sinn Fein)
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This would have come from the Oireachtas committee on housing which also published its own report. Under the non-Government borrowing fund, they could have utilised money from credit unions or long-term pension funds and so on.
David Cullinane (Waterford, Sinn Fein)
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Is that in place or is the Department looking at putting such a fund in place?
Mr. John McCarthy:
The NTMA is taking the lead role in relation to that fund. Ultimately, the aim is to try to deliver 5,000 units through it. It is still at an early stage and delivery is expected to be at the back end of the five-year Rebuilding Ireland programme rather than at the front. Similarly, there is a public-private partnership programme where we have details at this stage of two bundles of projects to be progressed. Again, the NDFA, which is part of the NTMA, is acting as the procuring authority there.
David Cullinane (Waterford, Sinn Fein)
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In terms of acquisitions, I come back to this issue of vacant properties.
Does the Department have a register, or even a vague understanding, of how many vacant residential properties exist in the State? Would Mr. McCarthy have even a rough figure?
David Cullinane (Waterford, Sinn Fein)
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There are 200,000 vacant properties.
David Cullinane (Waterford, Sinn Fein)
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I am looking at the two schemes, the repair and leasing scheme and the Housing Agency acquisition programme. What percentage of the 200,000 vacant properties is the Department seeking to bring into public ownership for social housing over the time period covered by the Government plans for housing?
David Cullinane (Waterford, Sinn Fein)
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I have established that there is a number of initiatives. It is quite a precise question on the percentage and number of houses that the Department seeks to bring into public ownership vis-à-visthe 200,000 which are vacant.
Mr. John McCarthy:
There are 1,600 under the Housing Agency acquisition programme, we are targeting 3,500 units under the buy-and-renew programme and at this stage the ambition for this year under the repair and leasing scheme is for 800 units. A national extension of that for this year has just been announced. Subject to the completion and evaluation of that scheme, it will probably continue on again into next year. In the ordinary course of events, annually as part of the main programme, there will probably be approximately 1,000 acquisitions.
David Cullinane (Waterford, Sinn Fein)
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How many people are in emergency accommodation at the moment?
David Cullinane (Waterford, Sinn Fein)
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Just over 7,000. How many people are on local authority waiting lists for housing?
David Cullinane (Waterford, Sinn Fein)
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Some 91,000 and we have 200,000 vacant properties. That tells its own story. Is the Department looking at making greater use of compulsory purchase orders in respect of vacant residential properties?
David Cullinane (Waterford, Sinn Fein)
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Why not?
David Cullinane (Waterford, Sinn Fein)
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We would also, I would hope, want to encourage people who have vacant properties to use them either for the housing assistance payment, HAP, scheme or the other schemes. It is an issue that we all raise, in that people find it very difficult. A lot of people are competing for the same houses. We need more houses available for the HAP scheme. Has the Department examined the possibility of a vacant home tax?
Seán Fleming (Laois, Fianna Fail)
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In fairness, that is a ministerial policy issue.
David Cullinane (Waterford, Sinn Fein)
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It would generate revenue.
Seán Fleming (Laois, Fianna Fail)
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That would be a Government policy issue but the Deputy can ask Mr. McCarthy if his Department has done any work on it.
David Cullinane (Waterford, Sinn Fein)
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I am asking about his Department and whether it has done any work on it.
Seán Fleming (Laois, Fianna Fail)
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The Deputy should not stray too much into ministerial policy.
David Cullinane (Waterford, Sinn Fein)
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I am not asking the Minister. The Department has a role to play in developing policy on behalf of the Minister.
Seán Fleming (Laois, Fianna Fail)
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But taxation-----
David Cullinane (Waterford, Sinn Fein)
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As Mr. McCarthy is the departmental head, I am asking him whether the Department has done any work on a vacant home tax. Has it examined the possibility of it?
Mr. John McCarthy:
We have not, on the basis that taxation policy is dealt with by the Minister for Finance. That is not territory that we would get into. The territory we would get into is looking at the available funding we have and to see how we can stretch that to tap into vacant property. That is why we have the repair and leasing scheme, the buy and renew initiative and the Housing Agency acquisitions. That is how we use our funding. Taxation is on the other side. It is an issue for the Minister for Finance.
David Cullinane (Waterford, Sinn Fein)
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We have heard an awful lot about modular homes recently. Does Mr. McCarthy have the cost of a modular home versus a comparable traditional home?
Mr. John McCarthy:
There is a procurement process ongoing for some of those at the moment so I want to be careful that I do not give out too much information. Certainly there is a figure out there in the public domain for the first pilot project in Ballymun. For the 22 units involved the cost was €180,000 per unit plus VAT.
Seán Fleming (Laois, Fianna Fail)
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Excluding the site.
David Cullinane (Waterford, Sinn Fein)
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How long would a modular home be expected to last?
David Cullinane (Waterford, Sinn Fein)
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At least 50 years. Would they have a shorter shelf life than bricks and mortar?
Mr. John McCarthy:
No. We really look for modular housing to deliver the same quality. Modular housing is really another way of delivering the same product. We would see modular housing as having great capacity to accelerate delivery under the main local authority housing build programme, as opposed to just being an initiative on its own for dealing with homeless households. It still delivers the same product quality.
David Cullinane (Waterford, Sinn Fein)
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What tendering process is used?
Mr. John McCarthy:
Through 2016, local authorities themselves did the tendering individually, while in parallel, the Office of Government Procurement was putting in place a national framework. That is in place now since December so local authorities or approved housing bodies can tap into that framework and draw from it.
David Cullinane (Waterford, Sinn Fein)
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One last question and then we will finish. How many modular homes does the Department hope will be put in place? What is the target in terms of numbers?
David Cullinane (Waterford, Sinn Fein)
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A total of 1,500 units?
Noel Rock (Dublin North West, Fine Gael)
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I thank Mr. McCarthy for the information. Earlier he was speaking with a colleague, Deputy Peter Burke, about the case where Dublin City Council gave a €6.6 million interest free loan to James Elliott Construction in respect of Ballymun Regeneration Limited in addition to the contract for €10 million of building repair works which were not put out to tender. Mr. McCarthy defined this in his contribution as bad practice, which is correct in my opinion. Is he aware of any other cases like this under local authorities? Does he think this is completely unique in a national context?
Noel Rock (Dublin North West, Fine Gael)
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What steps are being put in place to make sure something like this does not happen again? This seems only to have come to light as a consequence of documents being revealed to The Irish Times.
Mr. John McCarthy:
This was discussed with Ballymun Regeneration Limited at the time so it was very much a tailored solution to a very peculiar set of circumstances. It is not that it has only just emerged. It would have been the subject of discussion back in 2007 and 2008 when the problem first arose.
Noel Rock (Dublin North West, Fine Gael)
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Why was a tender not put in place for the construction works? I can understand the loan component to a certain extent.
Mr. John McCarthy:
There was a range of issues and risks that needed to be considered around the two options, either to discontinue the existing contractor and go through a procurement process or to continue the existing contractor on site to remedy and to complete. The relative costs and risks associated with that were the subject of a risk assessment and the outcome of that was that while there were pluses and minuses for both routes, on balance continuing with the existing contractor to remedy and to complete was the preferable option.
Noel Rock (Dublin North West, Fine Gael)
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It was a peculiar set of circumstances as Mr. McCarthy himself acknowledges.
Noel Rock (Dublin North West, Fine Gael)
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In the same part of the world geographically, Mr. McCarthy referenced modular housing in his answer to Deputy Cullinane's questions about Ballymun. Is the feeling that, financially, the modular home project was something of a learning experience? Would Mr. McCarthy say that, based on the figure per unit he gave?
Mr. John McCarthy:
I think the figure per unit is a very competitive cost per unit. There was certainly a learning attached to it and that is why we did it on a pilot basis first, in order to be able to learn. In terms of the procurement process, because much of the product that is ultimately delivered is actually manufactured off-site, one of the most significant learnings that came out of it was that being involved in the processes in the factory is every bit as important as when it actually comes onto the site and is being constructed. That was something that certainly came across very clearly in terms of major learnings from the pilot project.
Noel Rock (Dublin North West, Fine Gael)
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While the cost per unit was competitive with a regular build house, the timelines of the modular housing project were consistently delayed. Would it have been the case that it would have been better to simply build regular houses?
Mr. John McCarthy:
No. It certainly took a little bit longer than was originally envisaged. If one thinks back to September 2015, which was the first time there was a display of modular type housing units, various parties, including ourselves, went to inspect them. From memory, it was late October before the procurement process for the Ballymun project was started. The contract was awarded before the end of November. That was a very tight period and the units were ultimately available in April. In comparison with a 22-unit housing project, to deliver it in five months is still considerably shorter than my experience of a comparable traditional-build project.
Noel Rock (Dublin North West, Fine Gael)
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In terms of that timeline, there were lessons learned there as well that would optimise things in future.
Noel Rock (Dublin North West, Fine Gael)
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Deputy Cullinane hit on something that came up at our parliamentary party meeting last night, which is the number of vacancies, especially in Dublin, where 6.9% of housing units are vacant versus, for example, London, where the figure is 1.9% and the UK generally, where 2.4% of housing units are vacant. Is the Department developing any policy responses to deal with that?
Mr. John McCarthy:
The main thing we are trying to do is to develop the vacant house reuse strategy which is at an advanced stage in the Housing Agency. More detailed analysis on housing will be made available from the census on 20 April. That will help. We have not been waiting for that. There is the Housing Agency acquisition programme, the repair and leasing scheme and the buy and renew scheme as well as mainstream acquisition, all designed to tap into vacant property. One issue raised consistently is the extent to which there may be vacant property associated with older people availing of the fair deal scheme and being in nursing home accommodation. Since last month we started to work with the Department of Health to see if there is a significant quantum of housing vacant for those reasons and, if so, whether we can incentivise it back into use.
Noel Rock (Dublin North West, Fine Gael)
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I understand the repair and leasing scheme is subject to a significant expansion. Was that announced today or is it to be announced?
Mr. John McCarthy:
It was and we started in the autumn with pilots in Carlow and Waterford. The Minister announced in recent days that we are expanding it nationwide to 800 units and we will see what that tells us. The initial feedback from Waterford and Carlow was that there was quite a bit of interest from property owners.
Noel Rock (Dublin North West, Fine Gael)
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Does the Department have any national targets if it is to expand it nationally?
Mr. John McCarthy:
Our first port of call is to try to learn as much as we can from the 800. We will write to all local authorities. Some of the Dublin local authorities have been advertising ahead of the scheme for expressions of interest from people with vacant properties. Our first step is to try to make sure we use the available money to get to the 800, learn from that and then we can consider targets for local authorities.
Shane Cassells (Meath West, Fianna Fail)
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Mr. McCarthy said in respect of the local government fund that in effect the €399 million for the operation and subvention of Irish Water was moved from one column to another in that it existed for the funding of water services in the county council system. When the county councils were operating the water services, was €399 million being put into the operational costs across all the 130 odd local authorities at the time? Is that money being used for the same purposes? In his opening statement Mr. McCarthy said the €399 million in 2015 funded the allowance of 21,000 litres of free water provided in respect of all children, the cost of capping the domestic water charges and the cost of providing a general subsidy for the cost of services reduced to level of unit charge. They were all subsidies as opposed to operational costs. Although Mr. McCarthy said the €399 million was being moved from the cost of what local authorities were doing to Irish Water, they are very specific items.
My understanding is that if there is a problem with water, a person should ring Irish Water which confirms that with the local authority, and under the service level agreement there is a billing arrangement. Who is paying the staff in the county councils? Is the money coming through the service level agreement or are they paid by the council? If so, where is the cost to the State?
Mr. John McCarthy:
The Irish Water system is subject to economic regulation by the Commission for Energy Regulation, CER, which determines the efficient level of cost it should be allowed to incur. It meets those operating costs through charges, when they were in place, through non-domestic charges and the subvention by the public purse, which is described in my opening statement.
I will ask my colleague, Ms Graham, to say a few words on that and on the issue of the staff employment situation through the service level agreements.
Ms Maria Graham:
The calculation was initially made between 2013 and 2014, when the statutory responsibility transferred to Irish Water, of the general purpose grant, as it was then, the operating costs of local authorities and the income, and the amount struck was €439 million, which was the first year's subvention. In 2014 there was no economic regulation and there were no domestic charges. That €439 million came out of the general purpose grant and went to Irish Water, which would have got a capital grant. We then moved into a different phase.
Shane Cassells (Meath West, Fianna Fail)
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Did the €439 million take account of everything in respect of the operational costs of water services for local authorities? I presume that included the staff wages within the local authorities for those assigned to that work.
Ms Maria Graham:
Absolutely. In parallel with that, Irish Water would have set budgets because the service level agreements would have been signed off and individual budgets would have been agreed with local authorities which would have covered staff and other costs. Some of the costs have moved gradually, for example, the chemicals and energy costs that would have been borne by local authorities have moved centrally into Irish Water. The headcount in the local authorities is agreed year by year and they are reimbursed. The Irish Water accounts and operating costs show the payroll of Irish Water, the local authority services agreements and all the other components. There were design, build and operate costs as well. That is the range of costs that local authorities would have applied.
Shane Cassells (Meath West, Fianna Fail)
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Was the €439 million payroll when it was in the county councils?
Ms Maria Graham:
The €439 million is a net figure, taking account of the fact that there would have been revenue coming in from the non-domestic sector and it had some downward adjustment in moving to Irish Water as part of the Estimates process.
The total cost in 2013 of operating public water services was approximately €721 million in local authorities.
In 2015, the payroll costs of local authorities within Irish Water was €263 million. My recollection is there are three broad terms: the DBO contracts; the payroll costs; and energy and chemicals, which are the other two big factors within it. We had an analysis at one stage of that breakdown. It was in the PwC report, which we can get and pass on to the committee.
Shane Cassells (Meath West, Fianna Fail)
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The 2013 figure of €721 million is the gross figure.
Shane Cassells (Meath West, Fianna Fail)
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Is €439 million the figure after commercial water rates?
Ms Maria Graham:
Yes. We are staying with local authorities for the group water sector. Overtime rates have remained within that. There are loans that have remained with local authorities. We mentioned earlier that there are many HFA loans which latterly were part of Government debt and a payment was given to local authorities. At the outset of the meeting, the Comptroller and Auditor General mentioned the money was going in and was then used to pay off. That was a two-way transaction, with one crossing out the other, but until that point there were interest charges that had to be borne by local authorities. It continued to go to them from the local government fund. That funding was not transferred to Irish Water. That is how the €439 million becomes a much reduced figure.
Shane Cassells (Meath West, Fianna Fail)
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I know Deputy Connolly wants to get in. Mr. McCarthy mentioned that in 2017 the Department hopes to progress land acquisition and land banks for councils. What are the criteria of suitability? I refer again to the 28 acres that Meath County Council owns, which is land locked. The council bought 28 acres for €22 million and it is landlocked. In terms of accessing that land, a capital fund will be needed for road access which will traverse private land, and also for water and sewerage. In terms of the Department working with county councils on land suitability, what are the criteria the Department is going through?
Mr. John McCarthy:
I spoke about the land framework earlier that I want to put in place in the second half of this year so that there will be a robust regime that will deal with future land acquisitions. There are issues around value for money which is tied into usability, suitability from a zoning point of view and from a sustainable communities point of view. We need to articulate that in the legislation and associated guidance. We need much more clarity between the local authority and the Department. I do not know the specifics of the site the Deputy is talking about. I do not know if it is one that the council put forward for consideration as part of a wider land development under the local infrastructure housing activation fund. That may help but I do not know off-hand.
Shane Cassells (Meath West, Fianna Fail)
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I might talk to Mr. McCarthy about it again rather than waste the committee's time.
Mr. McCarthy mentioned sustainable communities. What help is available from the Department directly to local authorities in respect of implementing that as a reality for sustainable communities? There is an area in my town of Navan called Johnstown where there are 3,000 homes and no facilities. It is a result of planners and councillors zoning land banks 20 years ago with no facilities whatsoever. That area of the town has a bigger population than the town of Trim. What help is there? It is a massive issue at the moment and it has been covered by local media. What help is there from the Department to help the local authority provide community facilities? I am sure it has happened in Galway and elsewhere that county development plans are signed off and there is more building going on. What help is available because that community is crying out for the provision of a community facility?
Mr. John McCarthy:
Going back to the conversations we had earlier with Deputy Cullinane on the approval process, two things have contributed to the most significant delays in the approval process. The first is cost issues, namely, making sure we are getting value for money, and the other is sustainable communities. While we need to make sure the process works more efficiently, we are trying to avoid the type of situation the Deputy is talking about, which is a function of decisions that were made 20 years ago. We do not want to end up building large swathes of monotenure housing in one location.
On the community facilities issue, there has not been funding available to the Department over the past number of years in that space for a capital scheme but small funding is now provided. I can get the Deputy a note on new community facilities funds if he wants. The terms of the scheme are just being worked out but we can get the Deputy a note on the way it will operate and the type of projects it will be designed to cover.
Shane Cassells (Meath West, Fianna Fail)
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I would appreciate that. Was there a scheme before? We accessed money to the tune of €1 million for a community facility elsewhere.
Shane Cassells (Meath West, Fianna Fail)
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It was separate from the RAPID programme.
Shane Cassells (Meath West, Fianna Fail)
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Will the new scheme be similar to the previous one?
Catherine Connolly (Galway West, Independent)
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I have a number of specific questions and then I will go back to remediation sites and stuff. Have many applications come before the Department from groups on the ground looking for a site to build co-operative housing? There is great interest in Galway but they do not know where to go with that. Galway is a good example because a number of years ago, a co-operative site was used very effectively.
Mr. John McCarthy:
In the first instance, they would go to the local authority. There is now a land bank in the housing agency. One of the things we have done as part of Rebuilding Ireland is establish an approved housing body one-stop-shop within the agency. It has only got up and running in the past couple of months. There is space for the asset of land that is there and possible AHB projects to be-----
Catherine Connolly (Galway West, Independent)
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I am talking about a group of people coming forward, as they did last week in my office. They had the wherewithal to borrow money. Will the Department look favourably on such groups that came forward?
Catherine Connolly (Galway West, Independent)
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Could they not do it without that status?
Catherine Connolly (Galway West, Independent)
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The Chairman referred to housing loans. Is the Department actively giving people loans if they come forward? I understand that Galway City Council is not. I do not mean to be parochial.
Catherine Connolly (Galway West, Independent)
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Will Mr. McCarthy tell me if it is still open?
Catherine Connolly (Galway West, Independent)
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I welcome the extra staff for housing but I understand they are being used mostly for HAP and not for maintenance or doing up empty houses or to support the staff who are under strain trying to allocate houses. They have been taken on specifically for the housing assistance payment. Is that correct?
Mr. John McCarthy:
We certainly make a payment available. There are two things with staffing in local authorities. One is the sanction for their numbers and the other is how they fund it. On the funding side, we have made two things available to local authorities to support them. They receive a payment for every new HAP case they take on. That is for HAP but there is a separate capacity for local authorities to take on staff and fund them out of the capital programme to support the roll out of the capital programme. It was a particular issue some local authorities felt they were not in a position to deal with.
Catherine Connolly (Galway West, Independent)
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For every HAP applicant, they get a special extra-----
Catherine Connolly (Galway West, Independent)
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The issue of tendering has come up. It goes back to issues that were aired. At council level, we repeatedly asked for services such as legal and auctioneer services to be tendered out. Has that happened generally in local authorities? Are these services being tendered out?
Catherine Connolly (Galway West, Independent)
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They are not ad hoc, they are serious issues. As Deputy Cassells, I spent a long time at local council and we repeatedly asked for that. There was often one preferred company or group. It is a small country so I will not name names.
It was the same with valuations. I do not recall any in-house valuation in my time, but I will revert on this matter. I understood that there was a preferred external bidder that we kept using. These are issues of accountability.
I wish to discuss the astronomical figures for the tribunal of inquiry and the remediation of dumps or landfill sites, to use the correct language. The Tribunal to Inquire into Certain Planning Matters and Payments has cost €116 million so far. Money is still due, though, so it looks like the total figure will be €159 million. The tribunal stated that the majority of public officials performed their functions with the utmost integrity. I wish to place that positive comment on the record first, as I am moving on to a more damning part. I will ask the witnesses for the figures. It is clear from the inquiry's fifth and final report that, during the period in question, corruption in Irish political life was "both endemic and systemic". This is a damning finding, notwithstanding the qualification about the integrity of most staff, but what was the cost of finding that?
Mr. John McCarthy:
Deputy Connolly is spot on with her figures. The tribunal's estimate is that the final cost will be €159 million. Up to the end of 2016, we had spent just shy of €120 million. The bulk of the remaining approximately €40 million arising will be in respect of third party costs. A robust process is in place. Third party cost claims go to the State Claims Agency, which-----
Catherine Connolly (Galway West, Independent)
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Explain that for the public. What does "third party costs" mean?
Mr. John McCarthy:
They are the costs incurred by parties that appeared at the tribunal. Through a determination of the tribunal, they were to be refunded their legal costs. The witnesses and their legal teams submit their bills for costs, which go to the State Claims Agency to be assessed. At this stage, 312 third party cost claim files have been opened and 214 of them have been closed. The State Claims Agency-----
Catherine Connolly (Galway West, Independent)
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Mr. McCarthy said 214 of the 312.
Mr. John McCarthy:
Exactly. Before the State Claims Agency came onto the pitch, this was handled by cost accountants. The State Claims Agency was then established, so costs moved into that space. To date, the agency has managed files with claims amounting to €24.3 million, which were settled for €11.9 million, a saving of just over 50%. Without getting into specifics, I am aware of one settlement in which the settled amount was 70% less than what had been claimed. It is a rigorous claims settlement process.
The bulk of the remaining costs have to do with the settling of claims that are on hand but have not been closed. However, there are still third party cost claims that have not yet been submitted. My understanding is there is no way of bringing down the shutters and compelling people to submit their claims. The tribunal is working on this matter with a view to wrapping the tribunal up towards the end of 2018, but we will have to see how that pans out. The important aspect is to ensure that claims are being settled on the basis of a very rigorous assessment.
Catherine Connolly (Galway West, Independent)
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What is the breakdown of the overall figure in terms of legal costs, building rental and salaries?
Mr. John McCarthy:
I can provide a general breakdown. Of the €120 million that has already been paid, approximately €33 million was for 19 years of administrative costs. The tribunal's internal legal team cost €52.3 million. The tribunal needed to get external counsel for legal proceedings. That came to €4.5 million. There were other court costs of €2.7 million. Third party costs came to €27 million.
Catherine Connolly (Galway West, Independent)
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Could we have a copy of that breakdown?
Catherine Connolly (Galway West, Independent)
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My final question is on the land remediation figures. Are they a mixture of public and private landfill sites?
Catherine Connolly (Galway West, Independent)
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Some €126.487 million was spent on 51 landfill sites. Was that a one-off payment?
Catherine Connolly (Galway West, Independent)
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Kildare.
Mr. John McCarthy:
Yes. To date, €13 million or €14 million has been spent on that site. We have yet to go through the EPA licensing process, which will determine what will be required to complete the full remediation. Some of the sites have been fully remediated but the process is ongoing in respect of others.
Catherine Connolly (Galway West, Independent)
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Does any money come back from the private owners?
Mr. John McCarthy:
We can get the committee a note on that. Some of the larger privately owned sites were associated with illegal dumping activity and various criminal and civil cases were taken. I confess that I am speaking somewhat from memory, as this issue has moved away from us, but we will get the committee an update. Apart from any criminal process, some of the property owners were found to have been practically of nil means and were not pursuable.
Noel Rock (Dublin North West, Fine Gael)
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Is Mr. McCarthy familiar with the social housing public private partnership, PPP, bundle 1 project?
Noel Rock (Dublin North West, Fine Gael)
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Then Mr. McCarthy knows that it was initiated by his Department in budget 2015 and entails six sites across five local authority areas. While it is yet to be initiated, it is causing considerable concern among the communities affected. Mr. McCarthy discussed sustainable communities and community development with Deputy Cassells but we must also discuss the social mix. I spent my time as a councillor promoting the idea of a social mix and the inclusion of rent allowance in Ballymun, so it would be incongruous to claim that a 100% social housing development in a neighbouring community is a good thing. What is the rationale? Most studies accept that a social mix is a social good. As such, why is the project proceeding in this way?
Mr. John McCarthy:
Much of it comes down to scale. Deputy Cassells and I were discussing a development of 2,000 or 3,000 units, all of which would be for social housing. Quite a few projects in our mainstream social housing pipeline are in the order of 50 to 60 units. We generally do not have an issue with a social housing block of that scale. In larger sites, for example, O'Devaney Gardens where 600 housing units might be built, one would seek to get a mixed tenure on the site. In other cases, a smaller social housing development in the wider context can achieve the broader mixed tenure. These sites were proposed by the local authorities in the first instance. Under the process, the broader housing tenure mix in the wider areas was examined and the sites were considered suitable to be taken forward as part of that project.
Noel Rock (Dublin North West, Fine Gael)
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How did the Secretary General arrive at the funding model? Is this the first time he has put forward such a proposal? I understand there are two phases to the project.
Mr. John McCarthy:
There is a public private partnership programme for 1,500 units in total. Rather than waiting until the we fully bottomed out on sites to contribute 1,500 units, we have broken it into three different phases. The site to which Deputy Rock refers is in bundle 1, as we call it. We have also identified the sites for bundle 2 and we are in the process of identifying the sites the bundle 3. The National Development Finance Agency is acting as financial adviser to the Department on the project. There is a little bit of further work to do on bundle 1, but it is likely that the tendering process for bundle 1 will kick off soon, if not this side of Easter then very quickly after Easter.
Noel Rock (Dublin North West, Fine Gael)
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Mr. McCarthy's response has pre-empted my next question. Would the Department permit a local authority to buy units from this scheme?
Mr. John McCarthy:
As the scheme stands at present, that is not on the radar. The purpose of the scheme is to deliver social housing as opposed to mixed tenure. We have to be satisfied that the wider tenure mix is being achieved in the surrounding area, but these units would be for pure social housing use.
Noel Rock (Dublin North West, Fine Gael)
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In that one instance, on that site, I do not think it is, but that is a matter for me to raise with the local authority. I thank Mr. McCarthy.
Seán Fleming (Laois, Fianna Fail)
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Does the committee agree to dispose of Vote 34, Chapters 4 and 5 of the Comptroller and Auditor General's report? Agreed. On behalf of the Committee of Public Accounts, I thank all our witnesses from the Department of Housing, Planning, Community and Local Government and the Department of Public Expenditure and Reform. I also thank the Comptroller and Auditor General and his staff for being here today. We look forward to receiving the documentation we requested.