Seán Fleming (Laois, Fianna Fail)
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In the first session of today's meeting, we will consider chapter 8 of the Comptroller and Auditor General's report of 2016, which is on central Government funding of local authorities, the Local Government Fund Financial Statement 2016 and Special Report No. 97 on the administration and collection of motor taxes. The second session will focus on the Appropriation Account for the Department of Housing, Planning and Local Government. We may not complete the first session before divisions are taken in the Dáil at 12.50 p.m., in which case the session will continue thereafter and we will take a break before the second session commences.

As chapter 8 deals with funding for local authorities, much of which is for roads, and we are also discussing the special report on the administration and collection of motor taxes, it is intended to discuss relevant matters with officials from the Departments of Transport, Tourism and Sport and Housing, Planning and Local Government and representatives of Transport Infrastructure Ireland. However, only officials from the Department of Housing, Planning and Local Government need to be here for the second session. It would be too unwieldy to deal with all these matters in one session.

The first session will focus on chapter 8 of the Comptroller and Auditor General's report of 2016, which is on central Government funding of local authorities. Members noted the importance of having a good understanding of how local authorities are funded. While local authorities are not accountable to the Committee of Public Accounts, they are substantially funded from the Central Fund, mainly through the Department of Transport, Tourism and Sport, Transport Infrastructure Ireland and the Department of Housing, Planning and Local Government. We asked the Accounting Officers from all three bodies to appear for this reason.

We are joined from the Department of Housing, Planning and Local Government by Mr. John McCarthy, Secretary General, and his officials, Ms Maria Graham, Mr. Paul Lemass, Mr. Maurice Coughlan, Ms Lorraine O'Donoghue, Mr. Rory O'Leary, Ms Theresa Donohue and Ms Janet Jacobs; from the Department of Transport, Tourism and Sport by Mr. Graham Doyle, Secretary General, and his officials, Mr. Ray O'Leary, Mr. Dominic Mullaney, Mr. Tim Scully and Ms Marie Gleeson; and from Transport Infrastructure Ireland by Mr. Michael Nolan, chief executive officer, who is joined by Mr. Peter Walsh and Mr. Pat Maher.

I ask the Accounting Officers to be as concise as possible in making their opening statements, which will be published and noted. I am sure the weather of recent weeks placed considerable pressure on all Departments as well as Transport Infrastructure Ireland. I expect, therefore, that they had more pressing priorities than usual while preparing to appear before the Committee of Public Accounts. Given the ability of the witnesses, I have no doubt they will be able to take this meeting in their stride, as they did when dealing with everything else in recent weeks.

On behalf of members of the committee and members of the public, I thank Mr. Seán Hogan, national director for fire and emergency management, and all the staff involved in recent efforts for the commitment they showed in keeping the country as safe as possible. It would be remiss of the committee not to thank them. Mr. Hogan is not here today as he is probably still busy but perhaps he will be able to rest next week. I would also like to record the gratitude of elected Members for the fabulous work carried out by local authorities and various agencies in recent weeks. Their work is genuinely appreciated by the public. The handling of recent weather difficulties enhanced the esteem in which the public service is held by the population. People appreciated the role of public servants and their work with community and voluntary organisations. It had a beneficial impact and much good came from it, notwithstanding the difficulties we experienced.

I remind members, witnesses and those in the Public Gallery that all mobile telephones must be switched off or placed in aeroplane mode. Placing telephones in silent mode is not sufficient as they will continue to cause interference with recording equipment.

I draw the attention of witnesses to the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, they are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to so do, they are entitled thereafter to only qualified privilege in respect of their 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 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 policies.

I call on the Comptroller and Auditor General to make a brief opening statement.

Mr. Seamus McCarthy:

As the Chairman stated, central Government funding transfers to local authorities present a highly complex picture, with transfers from a number of departmental Votes and funds for a wide variety of purposes. In my annual report each year, I include a chapter designed to present an overview of the level and trends of such funding and the purposes for which that funding is provided. Figure 8.1 in the chapter, which is replicated on-screen, gives an indication of the many sources and flows of the funding for 2016.

I should point out that there have been some structural changes in how the funding moves since the report was published. In particular, since the beginning of this year, motor tax receipts are no longer paid into the local government fund. They are now paid into the Central Fund of the Exchequer, like other tax revenue receipts. Moreover, local property tax receipts, which are collected by Revenue, are now paid directly into the local government fund, rather than into the central fund.

In 2016, the aggregate transfers of funding from central government to local authorities amounted to slightly more than €2.2 billion. Over 80% of this funding was provided either through Vote 34 - Housing, Planning and Local Government, or directly or indirectly from the local government fund. Both the Vote and the fund are administered by the Department of Housing, Planning and Local Government.

One of the key functions in administration of the local government fund is the allocation of local property tax receipts to individual local authorities using a redistribution model. The result of that redistribution is summarised in figure 8.3 of the chapter, included with the Comptroller and Auditor General's submission. The bulk of the funding transferred to local authorities in 2016 was earmarked for three spending areas; €913 million for housing and urban regeneration, representing 41% of the total; €639 million for transport investment, representing 29%; and €310 million for local authority general purposes, representing 14%. The final part of the chapter summarises the activities in 2016 of the Local Government Audit Service and of the statutory National Oversight and Audit Commission. These are the primary mechanisms through which central government funders gain the necessary assurance about the application of the funding provided to local authorities.

The 2016 account of the local government fund received a clear audit opinion. The account recorded income of just over €1.9 billion, and expenditure of €1.92 billion, resulting in a deficit of just less than €16 million for the year. The fund was financed mainly by motor tax receipts totalling €1.049 billion, local property tax receipts of €463 million and a contribution of €397 million from the Exchequer through Vote 34. However, it should be noted that on the expenditure side in 2016, a total of €318 million was paid over from the fund to the Exchequer.

Aside from sums directly or indirectly transferred to local authorities, the other substantial expense on the local government fund in 2016 was a subvention of €652 million paid to Irish Water. Members may wish to note that a further €184 million was contributed to Irish Water from the central fund of the Exchequer in 2016 in the form of capital contributions. I have dealt with the overall funding of Irish Water in a section of chapter 1 of my 2016 report.

The final part of this morning’s agenda relates to Special Report No. 97, which was completed in December 2016. The report presents the findings of an examination we undertook which reviewed trends in motor tax receipts, the costs of collection of the tax and the effectiveness of controls in ensuring compliance with motor tax regulations. The examination was carried out under co-operation arrangements between the Office of the Comptroller and Auditor General and the Local Government Audit Service.

As I mentioned previously, annual motor tax receipts amounted to just over €1 billion in 2016. While the number of vehicles taxed has increased in recent years, revenue has fallen from €1.16 billion in 2014. This reflects the ongoing replacement of older private vehicles by lower emission vehicles, which attract lower tax rates. The examination concluded that if other factors remain unchanged, decreases in motor tax revenue will continue. For example, we projected on current trends that the replacement of older private vehicles will reduce motor tax receipts by €260 million between 2015 and 2024. That is almost a quarter of the current total receipts.

Members will be aware that vehicle owners have the option to renew their motor tax for a period of three, six or 12 months. However, taxing vehicles for shorter periods is more expensive pro rata for taxpayers, and results in higher transaction processing costs for local authorities and for the Department of Transport, Tourism and Sport. We also found that on average, owners of older vehicles taxed on the basis of engine size renew their tax more frequently and for shorter periods when compared to owners of newer vehicles taxed on the basis of emissions.

Motor tax collection is now mainly done through the motor tax online system of the Department of Transport, Tourism and Sport. Local authorities collect a reducing share of motor tax revenue through their local motor tax offices. As a consequence of the dispersed collection system, the overall cost of administering the motor tax system is not readily identifiable. Data collected for the examination suggests that in 2014 the Department of Transport, Tourism and Sport and local authorities were incurring costs of around €49 million each year. We estimated that the cost of processing an online payment was around €5 per transaction, whereas the cost was about €10 per transaction when processed via a motor tax office.

In 2015, the online facility was used for two-thirds of transactions and increasing each year. However, there is significant variation in the online processing rate in individual counties. In Dublin and surrounding counties, close to 80% of transactions were conducted online. In Donegal, Roscommon and Longford, the rate of use of the online facility was closer to 50%. However, the examination found that there had been no recent evaluation of the factors influencing a customer’s decision to pay tax online or at a local office, or the period for which they pay tax. This information would help to inform planning for the provision of services in the future, including the use of IT solutions to increase the efficiency of service provision.

We also examined the operation of controls in relation to collection of motor tax. We found that there was no current estimate of the level of motor tax evasion, and that the impact of changes in regulations governing off-the-road declarations had not been ascertained. The examination also found that there was limited validation of key information such as name, address and insurance details when taxing a vehicle. Furthermore, there had been an increase in the proportion of frequent transfer of ownership of individual vehicles, which may facilitate the evasion of motor tax because arrears are not pursued when ownership changes.

The report makes a number of recommendations concerning the need to monitor motor tax evasion and analyse transaction data to identify emerging trends and support risk-based enforcement measures. As agreed, I will introduce the Vote at the beginning of this afternoon's session.

Mr. John McCarthy:

I am pleased to be here this morning to assist the committee in its examination of chapter 8 of the Comptroller’s report for 2016, dealing with

central Government funding of local authorities and the accounts of the local government fund for 2016. I am joined by colleagues whom the Chairman has already introduced

At the outset, I thank the Chairman for his kind remarks at the beginning of the hearing. They are very much appreciated, not least by me, because they save me the embarrassment of having to explain why some of us on this side of the room probably look a little bit the worse for wear. I echo the comments and I thank everyone involved, particularly in the Department and Met Éireann as well as a range of other Departments, agencies and local authorities that came together in a tremendous national effort. Also, I note the great sense of community. Without that community effort in so many places around the country we would not have been able to respond in the way that we did.

As requested, I have provided some advance briefing for the meeting. In addition, on 14 February I provided the committee at its request with detailed information on local government financing and oversight arrangements. I will therefore keep these opening comments short.

The chapter of the Comptroller and Auditor General’s annual report concerning central government funding of local authorities provides an overview of local authority expenditure and income, detailing the range of programmes for which local authorities are responsible, including housing, roads and environmental services, and the range of related funding sources.

As the chapter shows, transfers of funding from central Government sources to local authorities in 2016 totalled over €2.2 billion. The local government fund, LGF, accounted for 42% of this amount. A range of Departments, including my Department and the Department of Transport, Tourism and Sport, as well as other organisations, are involved in providing this annual funding to local authorities.

The local government fund, LGF, accounts for 2016 give details of the operation of the fund in 2016. The income sources to the fund that year totalled over €1.9 billion made up of motor tax of €1.049 billion, local property tax, LPT, receipts of €463 million and a payment from the Exchequer of €397 million.

The main payments from the LGF in 2016 included LPT payments to local authorities of €453 million, a payment of €349 million to the Department of Transport, Tourism and Sport for works on non-national roads and for public transport infrastructure, a payment to the Exchequer of €318 million and a payment of €652 million as subvention to Irish Water.

As the committee is aware, from January 2018, responsibility for motor tax transferred to the Department of Transport, Tourism and Sport, with consequential implications for the local government fund. In particular, motor tax proceeds are now paid directly into the Exchequer rather than into the fund, which is now primarily a means of channelling LPT revenues to local authorities.

Funding for Irish Water is now routed through my Department's Vote and funding for roads and public transport, formerly routed through the fund, is now channelled through the Vote of the Department of Transport, Tourism and Sport. All the changes result in much greater transparency in terms of the various flows of funds involved.

In terms of accountability, as the committee is aware, under the existing policy and legislative framework, the Local Government Audit Service, LGAS, provides statutorily independent scrutiny of the financial stewardship of local authorities and other local bodies. The LGAS 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 audit report to every member of the local authority for their consideration at the next practicable council meeting. In addition, the audit committee of the relevant local authority will review any audited financial statement, auditor’s report or auditor’s special report in regard to the authority and will assess any actions taken within that authority in response to either a statement or report, and will report to that authority on its findings.

Scrutiny arrangements for local government were also enhanced in recent years with the establishment of the NOAC, the National Oversight and Audit Commission. The NOAC scrutinises local government performance in fulfilling national, regional and local mandates, scrutinises 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 committee has recently received at its request an update from the NOAC on its work programme. I forwarded that to the committee with my letter of 14 February.

The NOAC chair appeared with others before the Joint Committee on Housing, Planning and Local Government last November for a discussion on local government finance issues.

I and my colleagues will be happy to respond to questions or issues relating to the Department that emerge in the course of the committee’s work this morning.

Mr. Graham Doyle:

The Chairman has already introduced my colleagues. I thank the committee for inviting me here today. To briefly add to the Chairman's very kind words earlier, I would like to offer my thanks to the various teams within the transport family of agencies and operators, including those in the Irish Coast Guard, who worked tirelessly last week and into the weekend to ensure the safety of people throughout the recent Storm Emma. I would like to thank also An Garda Síochána, Civil Defence and local authority staff for the assistance and support given to our transport operators in restoring our transport services and in helping to keep open our road network.

I will begin with the report on central Government funding of local authorities. I hope to clarify how the Department of Transport, Tourism and Sport distributes funding to local authorities. In 2016, local authorities received over €2.2 billion from Departments. Of that, my Department provided funding of just over €620 million, representing approximately 28% of the total central local authority funding.

The roads maintenance and improvement area is by far the biggest recipient of funding from my Department representing over €570 million of the overall amount from us in 2016. Public transport received just under €40 million, with the balance allocated between grants for swimming pools, sports capital grants and tourism related projects.

The improvement and maintenance of regional and local roads is the statutory responsibility of the relevant local authority in accordance with the provisions of section 13 of the Roads Act 1993. There are three main grant programmes operated by the Department and these are pavement sealing to protect the road surface from water damage; road strengthening to lengthen the life of road pavements; and a discretionary grant, which allows for a range of activities including pothole repairs, edge strengthening, renewal of signs and lines and winter maintenance. Those three programmes account for most of the grant funding and are allocated based on the length of the road network in a particular local authority area.

The selection and prioritisation of works is decided by local authorities and is funded by their own resources supplemented by State road grants. Local authorities can also apply each year for bridge rehabilitation grants and for safety improvement schemes to address particular hazards.

As our funding is intended to supplement local authority funding, the Department continues to emphasise to local authorities the importance of prioritising roads' maintenance when allocating their own resources.

The Department has focused in recent years on developing an evidence based approach to determining long-term funding requirements for annual maintenance of the road network. The Strategic Framework for Investment in Land Transport was published in 2015. That sets priorities for investment in land transport, and estimates an appropriate quantum of investment on an annual basis. It seeks to cover the annual maintenance requirement for the network and allows some limited funding for new transport projects. In 2015, it was calculated at €1.6 billion per annum in total, with approximately €300 million of this coming from non-Exchequer sources. A sum of €1.3 billion was therefore the annual Exchequer contribution required for capital maintenance of the land transport network. The Department’s evidence based approach has been influential in securing greater focus on the requirement for ongoing maintenance of the road assets.

The Building on Recovery Capital Plan 2016 to 2021 provided for a gradual build up in capital funding from a relatively low base in 2016 towards the levels needed to maintain the road network in a steady-state condition and allow for some investment in road improvement schemes.

The 2018 capital allocations are the first in a four year period of increased investment. Allowing for an additional €490 million approximately in funding allocated under the capital plan review last year, total roads investment for the period 2018 to 2021 is planned to be approximately €4.3 billion.

By 2022, we will be in a situation where the maintenance and renewal of our assets matches the pace needed to protect our infrastructure such as national and regional roads and the public transport fleet. We are acutely aware that this capital investment needs to be bolstered by current spending to support the services we deliver. The national development plan has acknowledged that also.

The national development plan shows the breadth of capital investment this Department aims to bring forward for the benefit of our citizens and our economy. Under that plan, the Department is in a position to bid for resources to move from maintaining our infrastructure to adding to that infrastructure investment in future years.

In the context of the multi-annual funding approach, the Department is now progressing a further project called the planning, land use and transport outlook 2040, working closely with our national transport agencies and the Department of Housing, Planning and Local Government. The goal is to develop a high-level outline of the amount, type and location of transport investment required to realise the strategic outcomes of the national planning framework. We aim to look at protecting past investments, catch up on under-investment, research climate change adaptation needs and analyse the future transport needs of a growing economy and a growing population. This is planned to be substantively complete by July 2018, with a public consultation planned to be issued in October 2018.

I would now like to offer some insight into the way our funding is distributed to local authorities. Funding for roads is distributed in two ways. First, the Department itself makes grant allocations directly to local authorities for the upkeep of regional and local roads and utilises Transport Infrastructure Ireland's, TII's, payments system for this purpose. Second, the Department allocates an overall sum of money to TII in respect of national roads each year. TII is then responsible for the allocation of those moneys to local authorities.

With regard to public transport investment, funding is also allocated in two ways. First, under the sustainable transport measures grant and the regional cities programme funding to local authorities is distributed via the National Transport Authority. Second, funding goes directly to local authorities under a number of programmes, including active travel towns, smarter travel and national cycle network programmes. Regarding the smaller allocations, payments for tourism activities are paid via Fáilte Ireland to local authorities. Lastly, the Department itself makes payments direct to local authorities under the sports capital programme and the swimming pool programme.

The Department also offers some supports for local authorities over and above direct funding. A good example of that is the MapRoad project, which helps local authorities to monitor and track the performance of their road networks. The system also incorporates a centralised web based licensing module which allows utility companies to apply online for road opening licenses and road works permits.

I will briefly mention the local government fund financial statements that are also being examined.

I understand my colleague from the Department of Housing, Planning and Local Government has separately provided members with information on the local government fund financial statements which are also being examined and local government fund operations now and in the past. The fund has historically provided local authorities with funding to meet some of their day to day activities, including the provision of water services, roads and other public transport infrastructure, and for certain other local government initiatives. Motor tax receipts paid online are now routed directly to the Exchequer. At the time of the reports under discussion the money had been routed to the local government fund. Some moneys then came back to the Department of Transport, Tourism and Sport as appropriations-in-aid. Since the beginning of the year, my Department has received the vast majority of its funding directly from the Exchequer. The level of funding is the same as it would have been, regardless of the change in the routing of funding.

On special report No. 97 on the administration and collection of motor taxes, responsibility for motor tax policy transferred to my Department from the Department of Housing, Planning and Local Government on 1 January 2018. The functions transferred include motor tax policy and legislation, as well as responsibility for the related services provided by local authorities, including motor tax collection. In that regard, motor tax will continue to be payable in 26 licensing authorities - motor tax offices - as well as through the online motor tax facility which is managed by the driver and vehicle computer services division of the Department of Transport, Tourism and Sport which is based in Shannon. The transfer of the motor tax policy function from the start of this year brings the policy and operational aspects of the motor tax function under the umbrella of one Department. This should provide for greater cohesion in future policy and technological developments.

The Comptroller and Auditor General made seven recommendations and progress has been made on all of them. I have appended an update for the benefit of members. If the committee so wishes, I will go through the seven recommendations made and take questions as the session continues.

Seán Fleming (Laois, Fianna Fail)
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I thank Mr. Doyle and invite Mr. Nolan to make his opening statement.

Mr. Michael Nolan:

I thank the Chairman and the committee for the invitation to attend. I am accompanied by Mr. Peter Walsh, director, capital programme, and Mr. Pat Maher, director, network operations. While the invitation relates to the overall funding of local authorities, I will limit my statement to the allocations for the maintenance and improvement of national roads. The briefing papers set out the significant roles our partner local authorities perform in supporting these activities.

On national roads improvements and maintenance funding provided for local authorities in 2016, Transport Infrastructure Ireland,TII, received €411 million in State funding to maintain, manage and improve the national road network in 2016. This funding also provided for PPP committed payments amounting to €119 million. The final spend by local authorities on maintenance and improvements was approximately €200 million. The balance was principally allocated to centrally procured operations, asset renewals and maintenance activities. A breakdown of the 2016 spend by category for TII and the local authorities is provided in the briefing material. The trend in capital funding provision for national road improvements was downwards in the years 2010 to 2016, inclusive, as indicated in Chapter 8 of the Comptroller and Auditor General’s report on the central government funding of local authorities. This reflects the successful conclusion of the major inter-urban motorway construction programme in December 2010. The focus of TII post-2010 has been on maintaining the network and renewing assets to the extent possible but at the expense of maintaining a pipeline of new major road projects. The expenditure on national road pavements and minor realignments, safety and bridge works remained relatively unchanged through the years 2010 to 2016, inclusive. A graph depicting trends in local authority expenditure, by activity, has been provided in the briefing material.

State funding available to TII in 2018 to maintain, manage and improve the national road network is €466 million. The most notable element of TII's 2018 grant allocations to local authorities is the increase in funding made available for pavement asset renewals which is over €60 million greater than last year's allocation. Maintenance funding is, however, down by 15% on 2017 levels which will pose particular difficulties for TII's management of what is now a more extensive and high speed network. We also manage a more resilient and strategic winter maintenance system. This system is expensive to operate. Investment in such resilience has proved to be highly justified and warranted. I thank the Department for supporting TII's investment in a network of salt barns and maintenance compounds strategically located around the network. This investment was made following the experience of the winters of 2009 and 2010. We will continue to work with the Department as we review road network requirements and strategies following the recent severe weather events. Salt stocks are adequate as we approach the end of the 2017-18 winter season. Other activities associated with the running of the national road network include incident response, traffic messaging and control activities.

The recently published national development plan recognises the importance of ensuring the quality and value of past investments are maintained to a high level to ensure quality levels of service, accessibility and connectivity. Prioritisation of this type of investment is a recommendation of the recent public investment management assessment conducted by the International Monetary Fund. The Department of Transport, Tourism and Sport strategic investment framework for land transport analysis has established the investment level required to maintain, manage and renew the existing transport infrastructure to keep it in an adequate condition. This is known as steady State investment. The steady State investment requirement for the existing network is expected to be substantially achieved by 2021. TII welcomes the commitment to increase maintenance and asset renewal expenditure over the lifetime of the national development plan to meet the required investment levels for the current transport network and as new projects are developed. The IMF report acknowledges that Ireland operates a highly developed system for determining and monitoring pavement quality on the road network and estimating the amounts of maintenance and rehabilitation funding required to maintain steady State road quality and availability.

I appreciate the Chairman's remarks about the remarkable performance of public service agencies in the past week. On behalf of Transport Infrastructure Ireland, I thank all local authority staff and motorway operation crews for maintaining service on national roads during the recent severe weather event. While my opening statement has addressed the matters raised by the committee as they relate to national roads, we will be happy to answer questions on any particular issue raised or any other matter of interest. Should we not have the information requested to hand, we will follow up with a written response.

Seán Fleming (Laois, Fianna Fail)
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I thank Mr. Nolan. Before I call the first member, for the benefit of those watching the proceedings of the meeting, I would like to set the context of what we are discussing. As set out in the reports before us, public funding for local authorities comes from nine sources, including the local government fund, the Department of Transport, Tourism and Sport, Transport Infrastructure Ireland, the National Transport Authority, the Department of Health, the Food Safety Authority of Ireland, the Department of Housing, Planning and Local Government, the environment fund and other Votes. In 2016 the funding amounted to €2.223 billion. What most people would like to know is, if that is the amount of public funding from central sources, what is the overall funding figure for all local authorities, including income generated locally. The amount provided through the central fund must be connected with the funding raised locally. Perhaps Mr. McCarthy might provide us with the overall funding figure for local authorities.

Mr. John McCarthy:

I will give the figures for 2016. Total revenue income in the local government system in 2016 was €4.3 billion, while total capital income was €1.7 bgillion, giving a total overall funding figure of approximately €6 billion.

Seán Fleming (Laois, Fianna Fail)
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I thought that by capturing all nine sources we would have captured most of the funding allocated to local authorities. Mr. McCarthy is now saying only €2.2 billion comes from the sources I mentioned, which is about one third of the funding allocated to local authorities. From where does the other two thirds come? The local authorities derive income from commercial rates, planning fees, development levies, housing rent payments, housing loans, mortgage protection schemes, parking fees, waste management recycling charges, landfill levies, contributions made locally under local improvement schemes, the community involvement scheme, the disabled person's housing aid scheme, the fire service, library services, swimming pools and recreational facilities and the residue which still comes in every year under the non-principal private residence scheme. Do all of these income streams make up the remaining €4 billion approximately?

Mr. John McCarthy:

Broadly, approximately 34% comes from rates, while 34% comes from the range of central government grants, including local property tax. The balance of 32% comes from the streams listed by the Chairman.

Seán Fleming (Laois, Fianna Fail)
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I thought we had a comprehensive list here today, and people would have assumed that. I know Deputy Cassells will mention rates and some other issues, but there is as much money being raised locally for revenue expenditure by local authorities themselves, separate from the commercial rates. Essentially, central government is only a small contributor and provides a third of the funding for revenue. I presume the Department of Housing, Planning and Local Government provides most of the capital.

Mr. John McCarthy:

Yes.

Seán Fleming (Laois, Fianna Fail)
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Fine. It is nice to get that information. The Department will probably send us a list of the breakdown of the three thirds and-----

Mr. John McCarthy:

Certainly. We can do that. It might be helpful to members to note that each year, the Local Government Audit Service produces what is called an activity report in which it pulls together the product of the audits of the 31 local authorities. It tries to give that overall national picture encompassing both the revenue flows that go to local government from central government, but also the locally generated stuff. It presents that overall picture. As the Chairman said, the Comptroller and Auditor General's chapter is designed to try to show the flows of funding from the centre to the local, but the annual activity report of the Local Government Audit Service presents the overall picture. I know from talking to the director that the report for the 2016 accounts is almost completed. It will probably be available in a couple of weeks. Once it is, I can certainly send-----

Seán Fleming (Laois, Fianna Fail)
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I ask Mr. McCarthy to send it to us because it is valuable reading.

Mr. John McCarthy:

Absolutely.

Seán Fleming (Laois, Fianna Fail)
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I have one final question. What is the total debt of all the local authorities combined? The Department must have an approximate-----

Mr. John McCarthy:

The total debt at the moment is, from memory - and one of my colleagues might clarify this - between €3.8 billion and €3.9 billion. That is my recollection but I will double check that for the Chairman. At the end of 2016, it was €3.85 billion.

Seán Fleming (Laois, Fianna Fail)
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That is fine. As Chairman of the Committee of Public Accounts, I am just surprised. I know people complain about the amount of fundraising involved. I am surprised to hear that two thirds of the income of all local authorities is generated locally through rates and all the other types of income. Most of those complaints are directed at the lack of funding from the Central Fund, but in fact it is only contributing one third. Finally, most of the €1.6 million capital is from central-----

Mr. John McCarthy:

Most of that is from central government. There are some situations in which a matching funding requirement might be in place for some schemes and the local authority might provide those through matching funding itself either through borrowing or other resources, but the bulk comes from the centre.

Seán Fleming (Laois, Fianna Fail)
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I call Deputy Cassells. I just wanted to get the big picture before we get into specifics.

Shane Cassells (Meath West, Fianna Fail)
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That is no problem. The Chairman is quite right to pose the questions he has posed. I am not surprised by what I have heard. I spent 17 years on the council until 2016 and am familiar with the pressures that we were under every single year in terms of self-generation of funds through parking income, rates and other levies so I am not surprised whatsoever. I was quite au faitwith those pressures that the authorities are under.

I welcome the many witnesses and thank them all for their service not just in the past week, but continuously on behalf of the State across the whole range of local government. Last week showed the best of the staff who work in our local authorities and all the emergency services and volunteers co-ordinating with them, and I have huge respect for each and every one of them and the work they do. As I said, we have a large number of witnesses this morning. It is the most I have ever seen at the Committee of Public Accounts. We also have a large number or reports, agendas, opening statements and accounts. In my 17 years on the council, one always would be wary of bulging agendas because the wily county manager, who at the time had the old country secretary, would stuff an agenda and make sure it was fairly big. When the councillors would come in, they would see the size of it and the fight would be gone out of them before even walking into the room. They would be happy enough to go with perhaps just works on a local road. I still remember talking to a manager in my early years as a councillor. He was nursing a pint of Guinness and he said to me, "Light agendas scare the bejaysus out of me, young Cassells, because God knows what they would ask me." I have only 20 minutes. I will focus on just one or two items and lighten this agenda.

I will kick off on the funding issue, in particular the local government fund, LGF, and people's property tax, a tax that, as we see from the information supplied, brings in some €450 million. In the broader context of the funding mechanisms, it is around 7% on that pie chart to which the Chairman referred so it is not a chief contributor. For the people who must pay the tax, it is obviously a very big charge. We know that the taxes are now under review for the charges for the coming years, and I know when Mr. Lemass was here a few weeks ago for the session on revaluation of commercial rates, he touched on the LPT very briefly, the review that was under way and the additional funds that could be raised from it. Regarding all the scenarios the Department is painting out, how much extra revenue does Mr. McCarthy feel can be derived from this fund? I am not asking him to go into the setting of policy but obviously he will present a number of scenarios and look at what is coming in in the first instance and not coming in in other areas. Can he tell me how much additional income the Department is aiming to bring in from the LPT? Is it a significant additional amount, based on the analysis of property price increases over the last five years?

Mr. John McCarthy:

I will say two things about the LPT. The LPT review that has been announced and which is under way is being led by the Department of Finance. As for what it aims to achieve through that review and the terms of reference that have been set out, the Department expects the review to conclude by the end of August. The Minister for Finance's statement refers to trying to achieve relative stability in the LPT payments of those liable for the tax and to provide clear direction on the likely payments faced by households in 2020. Obviously, a number of issues are live regarding the LPT. As it is based on valuations as of the autumn of 2013, from my recollection, properties completed since then are not within the LPT net at the moment and obviously, valuations to the extent that they may have changed since 2013 will also be relevant. From the Minister for Finance's point of view, there is no predetermined outcome regarding the LPT review. There is a separate issue which is of more concern - or certainly of as much concern - to us, which is, whatever pot of LPT proceeds is available, the manner in which that is distributed between local authorities. I think at this point there is a recognition of this, and we have been looking at this internally and with the Minister. I think there is a recognition that this distribution mechanism also needs to be looked at in parallel with the broader LPT. I am not in a position to say anything more about that second piece at the moment, but the Minister will make an announcement on it very shortly.

Shane Cassells (Meath West, Fianna Fail)
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I want to touch on this because the Taoiseach touched on it also and set out his personal views on the matter. I appreciate that the Department of Finance is considering this in the first instance but it will surely liaise with Mr. McCarthy and all the chief benefactors of the fund. Let us look at the scenarios without any predetermined outcome. I note that when writing a piece on this issue, Dr. Brian Keegan of Chartered Accountants Ireland, referred to how the revaluation is due next year, by which time most residential properties could well have seen an uplift in value of 50% or more. The tax is calculated on a percentage of the rounded value, so if the only change made is a higher property valuation, people will see their LPT bills increase substantially. This is coming down the road very quickly for every homeowner in this State.

This also coincides with the phasing out of mortgage interest relief. At the same time as losing mortgage interest relief that is benefitting households by €1,500 to €2,000 a year, people are facing a revaluation of the tax they pay on their property. Leaving aside any possible predetermined outcome, I want to ask a simple question. What is the Department's view on protecting people from the inevitable spikes in the bill they are to face if that is the outcome? Is the Department of Housing, Planning and Local Government liaising with the Department of Finance to suggest that it does not want people pay double what they are paying at the moment, that it wants to protect homeowners and keep the amount of income at the same level and in order to do so if there is a revaluation the charge would have to drop? Is the Department of Housing, Planning and Local Government painting that scenario for the Department of Finance?

Mr. John McCarthy:

Our engagement with the Department of Finance as part of this exercise will be within the context of what has been laid down by the Minister for Finance. Again, going back to what he said when the review was announced, he said, "The review will be informed by the desirability of achieving relative stability, both over the short and longer terms, in LPT payments of liable persons."

Obviously one factor in arriving at an LPT liability is the valuation of the property. Obviously, the rate that is applied to that valuation is also relevant. Needless to say there are other factors at play as well. As things stand at the moment there is a power available to local authorities to either reduce or increase the LPT locally by up to 15% in either direction. What decisions are made in relation to that obviously have implications as well.

Shane Cassells (Meath West, Fianna Fail)
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That is an interesting one because many local authorities have availed of that and have applied reductions year on year. It led to the unusual scenario of many county managers making public appeals over local airwaves not to do so, given the impact on services. That is quite unusual because as Mr. McCarthy knows county managers are quite reticent to make any public announcement, good, bad or indifferent. I have heard on my local radio station a county manager from a neighbouring county appealing on public airwaves for councillors not to do it because it would reduce the authority's income. Is the Department considering removing that power from councillors and providing a paper? Obviously, that is down to the Minister. I do not want to get into this because I will never get a straight answer. Is Mr. McCarthy suggesting to the Minister that that power should be removed from councillors because it is leaving local authorities bereft of money given that county managers, who form a very powerful lobby group, are saying that power should not be with councillors?

Mr. John McCarthy:

I will say two things in that regard. One of the issues that the Minister for Finance has pointed to as needing to be considered by the review now under way is what might be termed as the remaining recommendations of the Thornhill review, which was done in 2018. One of the suggestions - I put it no stronger than that - that was made in that was that perhaps there should be a power to increase the LPT locally rather than a power to increase and decrease, but no decision has been taken on that. It was just something that was flagged. No decision was taken on it by the Minister for Finance at the time, but he has indicated that that and other recommendations remaining on-----

Shane Cassells (Meath West, Fianna Fail)
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Therefore it is on the table.

Mr. John McCarthy:

It is there as part of that exercise. From our point of view as the Department with responsibility for local government - and again without expressing policy preferences - an important piece for us as part of the LPT exercise was that there would be discretion given to local authorities in order that local decision-making and local revenue were more connected. The power to both increase and decrease is very relevant in that context because while I would have heard some of the types of calls in media from some local authorities not to decrease the rate on the basis of how it would affect income, at the same time that can also become a driver of efficiency depending on what decisions people may wish to take. However, from our point of view, devolution of responsibility to the local authority to make decisions locally will be an important part of the exercise.

Shane Cassells (Meath West, Fianna Fail)
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I refer to that review of the distribution of the money because obviously there is the 80% retention of money. I mentioned the Taoiseach because he talked favourably about councillors being able to fully retain what they raise locally in improving local democracy. When it comes to the equalisation of the fund, the redistribution of the 20% from the central pot based on old scenarios that existed heretofore may have been inequitable. What has been considered in respect of that? If the full amount is not allowed to be retained, will the Exchequer meet the deficit that exists for those local authorities that cannot meet their commitments through what they raise through property tax?

Mr. John McCarthy:

On that issue, maybe to take a step back, in terms of the way the system operates at the moment and how LPT is allocated, as the Deputy says, there is 80% local retention and 20% goes to an equalisation fund. The purpose of the equalisation, as the Deputy well knows, is to ensure that those local authorities that have low LPT bases are brought up to what is called their baseline. However, even as the system stands at the moment, not enough LPT proceeds are derived from that 20% to get to that position for all of the financially weaker local authorities. As things stand at the moment the Exchequer is making a contribution to that pot. In future - these are conversations we have regularly with local authorities - if the pot remains as it is and some local authorities are to gain through an exercise of redistribution, inevitably that means that other local authorities would actually lose. What emerges from the LPT review, obviously if there are issues for Government to consider around whether there are implications for the level of additional Exchequer funding that needs to go in, those are decisions that would have to be made at that time.

Shane Cassells (Meath West, Fianna Fail)
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I return to my opening question. The Department should be advising the Minister how much additional revenue it feels needs to be raised from LPT. Even though the Department of Finance is carrying out this review, Mr. McCarthy knows intricately how large these councils' deficits are and how much additional resources he feels could be obtained from LPT. As future growth patterns will primarily be in the eastern region, the deficiencies that exist in counties such as Leitrim will still exist. I go back to my opening question. How much additional revenue does the Department believe the LPT could and should bring in?

Mr. John McCarthy:

On the "should" piece, I think that is determined by what - and there are many different views on this - level of service a local authority may need to provide. In terms of what an increase or a change of LPT could yield, if one looks at the system that is there at the moment and if it was never changed and if, for example, all local authorities were to avail of the power that is there to increase LPT by 15%, then based on the decisions that were made for 2018, there is a potential gain of more than €70 million without any change in the system. Any decision by a local authority to either increase or decrease is made locally. If a local authority decides to increase by 1%, 2% or anything up to 15%, it retains the full value of that revenue increase.

Shane Cassells (Meath West, Fianna Fail)
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I will move on to roads. In many people's minds the correlation between the payment of motor tax and the condition of the roads remains a bugbear, in terms of the number of people paying motor tax and even indeed in terms of the development levies they pay on their houses and the condition of roads around the country, which in many rural areas are absolutely in bits.

In his opening statement, the Comptroller and Auditor General said that annual motor tax receipts amounted to just over €1 billion. He noted that although the number of vehicles taxed in recent years had increased, revenue is falling due to the fact that many people are changing to newer models of cars that have lower emissions and attract lower tax rates. He said that income can fall by a further €260 million by 2024. Is the goose that lays the golden eggs dying on us, given that motor taxation is such a big contributor to the local government fund? If so, what scenarios are the witnesses envisaging to address it? Are they re-examining the lower rates of tax for lower emissions vehicles, given what the Comptroller and Auditor General has predicted? As we saw this week with Toyota, manufacturers are themselves moving towards coming further in line with that.

Mr. John McCarthy:

I might defer to my colleague from the Department of Transport, Tourism and Sport. Motor tax now goes directly into the Exchequer and policy responsibility has moved.

Mr. Graham Doyle:

We have always had this issue about the perception that there was a direct link between the collection of motor tax revenue and what was ultimately spent on the roads. Motor tax revenues now go directly to the Exchequer in a completely separate process from us negotiating with the Department of Public Expenditure and Reform each year through the budgetary process in terms of the allocation that we are able to apply to the maintenance and upkeep of the road network. A clear situation exists this year that motor tax revenues go directly into the Exchequer and we separately negotiate for the funding that we need to distribute to local authorities, both directly by ourselves and also through the national roads piece that Transport Infrastructure Ireland looks after. That change allows us to argue that case entirely separately. To the extent that there was any risk that the fall in motor tax revenues, through the local government fund, represented a risk to our funding in a given year, that risk is now taken away from us because we deal with that entirely separately.

Shane Cassells (Meath West, Fianna Fail)
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Let us go back again. In terms of the amount of money derived from motor tax that is going to reduce based on what the Comptroller and Auditor General has said, will Mr. Doyle tell me how that shortfall is going to be met?

Mr. Graham Doyle:

In terms of the setting of rates around motor tax at budget time, these are issues that will have to be taken by the Minister for Finance at budget time-----

Shane Cassells (Meath West, Fianna Fail)
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Chairman, I am getting really frustrated by this. We had this situation in respect of the commercial rates a couple of weeks ago as well. People in the Departments are surely painting pictures for Ministers. If the Comptroller and Auditor General is pointing out that income from this source is going to drop by a quarter of a billion over the coming years, someone somewhere is surely putting together a document describing scenarios, X, Y and Z that Departments are considering to raise revenues. We are underfunded in this area to begin with. If a quarter of a billion in motor tax goes off the books, it is a big issue. If no one in here thinks so, that in itself is an even bigger problem. Given that the Comptroller and Auditor General has flagged the decrease, what scenarios have been set out for the relevant Minister to find the money? Is a higher tax on these lower emissions vehicles being considered by the Department?

Mr. Graham Doyle:

The issue, as I understand it, has been raised for Ministers. It is an issue that has to be built into the budgetary process in terms of planning over the next years for how the Exchequer will cope with that drop on an annual basis. I think the estimate I saw recently was something in the order of about €30 million per annum. In the opening piece of the Deputy's question, though, he was concerned about the impact upon our ability to fund the maintenance and upkeep of regional and local roads as a consequence. My answer was based around the fact that-----

Shane Cassells (Meath West, Fianna Fail)
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My opening remark was just in terms of people's correlation in their minds. I am well aware of the terms of the distribution of funds, collation of funds and so forth. My primary concern is that if a quarter of a billion goes off the books, how is the Department seeking to replace it? When is the issue going to be addressed? Will it be in this budgetary cycle? It has been pointed out that already, despite more vehicles being taxed, income keeps decreasing year on year.

Mr. Graham Doyle:

There has not been an increase in the rates of motor tax in a number of years now - three or four years, I think. This is something that we will be raising through the budgetary process this year, now that this policy area has transferred across to the Department of Transport, Tourism and Sport.

Shane Cassells (Meath West, Fianna Fail)
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Another one the Department is going to get hit with------

Seán Fleming (Laois, Fianna Fail)
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The Deputy is gone over his time.

Shane Cassells (Meath West, Fianna Fail)
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I ask for a small bit of leniency.

Seán Fleming (Laois, Fianna Fail)
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The Deputy is going to get all the time he wants today. Other members have commitments in the Chambers as well, however.

Shane Cassells (Meath West, Fianna Fail)
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That is fine, Chairman. If the Department increases tax on lower emissions vehicles, it will quite rightly be criticised by environmental groups that are trying to support that industry. That means the money has to be raised elsewhere. The officials are going to have to say to the Minister that we had better raise it from local property tax, LPT, or commercial businesses. Everyone has to be talking together because, as the Chairman pointed out, there are multiple strands of funding coming in. What I am interested in is who is talking to everyone to make sure that enough money comes in to run the system, when there clearly is not enough money in the first place. Has increasing taxes on lower emissions vehicles been ruled out? Where are the officials going to find the quarter of a billion that the Comptroller and Auditor General said is going to disappear from the books?

Mr. Graham Doyle:

In terms of issues around taxation of vehicles, the introduction of the taxation rates based on CO2 emissions rather than engine size was designed to drive the take-up of vehicles that produced lower emissions. It has been tremendously successful in doing so, to the extent that there was quite a quick change in consumer behaviour which has continued over time. In the context of climate change issues, we are now looking at introducing lots of different types of vehicles into the system-----

Shane Cassells (Meath West, Fianna Fail)
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I only asked about the money. I asked about where the quarter of a billion is going to be found.

Mr. Graham Doyle:

I am saying that, in that whole policy debate around how we tax vehicles and deal with incentivising people to take up lower emissions vehicles, it has to be all taken in the round as part of the budgetary process.

Shane Cassells (Meath West, Fianna Fail)
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Taking it in the round is the point I am trying to make. The Chairman is trying to collate everyone in the room, which is why I am running out of time because there are so many people to ask questions. If everyone is working in silos and we are just putting the money into the Central Fund and no one is really addressing how it is coming in, or if there are decreases in income, then we have a serious issue for local government.

Guess who picks up the problem when there are problems with decreases across the board in income from other areas? The figure comes from central Government, which is what we are dealing with today. Councillors will row forever and a day about the fact that they are left without income to run the services properly that they are now expected to run, not just across the normal areas of roads and hosing but also, because of the urbanised areas that we have created, on social issues, arts issues, parks and so forth. They are the issues that communities now expect local government to resolve. How is that shortfall made up? It is made up by commercial rates.

The Chairman mentioned at the outset we are dealing here with €2.2 billion of an overall spend by local government of €6 billion, which is just over one third of what is spent. Let us be honest that local business, not central Government, is the primary source of income for local government in Ireland, providing €1.5 billion in that respect, which works out at 36%. Income from commercial rates increased by €137 million or 10% between 2008 and 2015 during a period of little or no inflation. That reliance on commercial rates has increased from 26% to 37% during that period. Nobody is addressing this issue.

When Mr. Lemass was here a number of weeks ago, we discussed the revaluation process that is causing such distress for so many business around Ireland. When I asked the Valuation Office about it, it was not its officials' problem. They were only doing what they were asked. It was the Department. When I asked the Department about it, it was not its officials' problem, it was the Minister. The only people paying the bill here are the businesses of Ireland. I want to address that here today. Councillors will end up increasing commercial rates because they need funding to run the services and it is the SMEs which will pay it.

By the way, today we praised everybody for their response to Storm Emma in the past week, and rightly so. One would have found that most businesses were closed for those three or four days. They had no income coming into their shops. They do not get a rates rebate for the four days that they were shut. Interestingly, it was reported in the media that there was a bonanza in online sales during those four days. It was as busy in Christmas for them. People were stuck at home so they started buying online. However, the poor people who are running a shop, who are dependent on the door opening and who keep our town centres alive, vibrant and contributing, got hit and got no rates rebate. I think of a friend in Navan who runs a small bakery and has an additional premises up here near these buildings who pays a six figure sum on rates on them. At the end of the year, if Meath County Council is short of money, he is the guy who gets hit. When he thinks of growing his business on those tight margins and maybe employing a second person or whatever, he cannot do so because he does not have the certainty, which Mr. McCarthy rightly spoke about providing to houseowners over a five-year period on how much is due on their LPT. Business owners in this country do not have that certainty when it comes to the commercial rates bill that they will be hit with because they do not know if councillors will be forced to increase commercial rates come the budget at the end of the year. Is this sustainable?

Mr. John McCarthy:

Looking at the national rates cumulatively in 2009, the picture is that there was just under €1.5 billion for collection. In 2016, it was €1.615 billion, which, doing a quick bit of maths, is €120 million over those seven years or possibly between 6% and 7%. I cannot do the maths on the top of my head here.

A number of things need to be borne in mind. When the downturn came in 2008-2009, all local authorities were requested to maintain their annual rates on valuation, ARVs, pretty much flat, and for four to five years virtually all did. There are issues, certainly, that can arise in the context of a revaluation exercise, but it is important to remember as well that there is a process in place to protect ratepayers as a whole through which rate limitation orders are made, so that in any year in which a revaluation is undertaken, a local authority cannot gain in overall rates revenue.

Shane Cassells (Meath West, Fianna Fail)
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I appreciate that. I do not want revisit the revaluation process today.

Seán Fleming (Laois, Fianna Fail)
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I have to go to Deputy Catherine Murphy now.

Shane Cassells (Meath West, Fianna Fail)
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I only asked one question. Is it sustainable?

Seán Fleming (Laois, Fianna Fail)
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We will come back.

Shane Cassells (Meath West, Fianna Fail)
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Is it sustainable for local government to continue whereby more than one third of income comes from the commercial rates of small and medium-sized businesses in this country? The proportion is growing. Is that sustainable?

Mr. John McCarthy:

When one looks at the proportion of income that has come from rates over recent years, and judging from the figures that I have given there, even the absolute amounts have not changed massively at a national level. Yes, there would be differences locally and there would be differences in individual businesses arising from revaluations, but the overall contribution has not changed significantly. The focus in more recent times has been not so much on increasing the ARVs but on collecting and improving the collection performance in relation to rates that are levied.

Seán Fleming (Laois, Fianna Fail)
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I am going to Deputy Catherine Murphy now.

Shane Cassells (Meath West, Fianna Fail)
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It is not sustainable. It is not reflective. We have not got an insight into the impact of online sales growth in this country and its impact on small and medium-sized businesses.

Seán Fleming (Laois, Fianna Fail)
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We will come back to it during the course of the meeting, but we have to go to Deputy Catherine Murphy, who is on a tight schedule.

Catherine Murphy (Kildare North, Social Democrats)
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First, I wish a good morning or, as it is now, good afternoon to the witnesses and welcome them. I, too, would like to add my voice to those who commended the efforts that we saw over the past week. Some areas did it on tight resources. When the review occurs, in the case of some of those resources it will be beneficial to look at where those deficiencies are so that the effort can be even better in the future. I will highlight a little of that.

The Comptroller and Auditor General talked about a highly complex picture. His language is benign in relation to local government. In some of the funding, particularly in the local government fund, the word "opaque" does not even go there. I note that from last year the transfer of motor tax from the local government fund to the central Exchequer may make it a little clearer. Until now, the motor tax was paying for water and the local property tax was paying for roads, which seems an Irish way of doing it.

I am pleased that there will be a review of the distribution and I will explore some of that particular aspect. The baselines are an area that would be of significant concern. They predate the local property tax and have their origins in the needs and resources model from 2000. There were data collected right up to 2005, but from then on that has been the base. There have been changes in functions, such as Irish Water, and there has been a pension change recently, but probably what will bring this into sharp focus is the fact that people will want to know where their local property tax is going. It is fine saying that the local authority can retain 80%, but there is a limited amount of discretion within that. In fact, some of the self-fund aspect of it is really a replacement for what might be central Government grants to local authorities.

There are some areas that are particularly badly affected. I will describe the staffing as a case in point because that would have been captured as a need that had to be resourced in that model. For example, Meath has a population 47,000 greater than Kerry but Kerry has 435 more staff. Kildare, with 848 staff, has a population 60,000 larger than Kerry but there would be maybe 150 extra staff working in Tipperary. Some of that is historic but the problem is it does not remain static as it is quite a dynamic environment.

One aspect that does not appear to be taken account of in the distribution model is the census of population. Will Mr. McCarthy confirm that is the case?

Mr. John McCarthy:

I absolutely take the Deputy's point about the complexity of the various flows of funds and the changes that have been introduced. We may have spoken about this issue last year. The changes introduced from 2018 bring much more clarity to bear. Rather than have money coming in on one side of the local government fund and then going out of it, the local government fund is far more a vehicle that relates substantially to local property tax. On the model, as it stands, the Deputy has pointed to the needs and resources model put in place in 2000-01, at which stage we were heading into the years of what became known as the great Celtic tiger economy-----

Catherine Murphy (Kildare North, Social Democrats)
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I am tight for time. I do not wish to be rude, but I ask for very succinct replies.

Mr. John McCarthy:

Yes. I am trying to put the matter in context because the Deputy has hit the nail on the head to some extent in why we are about to launch the review of the allocations made. There is a significant historical base attached to it.

Catherine Murphy (Kildare North, Social Democrats)
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What about the census?

Mr. John McCarthy:

As the same model for LPT distributions has been in place since 2014, it has not taken account of changes in population. On the Deputy's point about population and staffing in local authorities, the situation varies in different local authorities. Some of it depends on the extent to which they do certain things in-house or whether they contract services for delivery. Such things can influence the comparison.

Catherine Murphy (Kildare North, Social Democrats)
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I accept that people are employed, but there probably needs to be workforce management to some degree where some of the local authorities that have to cater for an increased population are unable to play catch-up in staffing. I put some tables together to look at the trend. The trend is that in the case of County Wicklow, for example, which the Department uses as a case in point in its table for demonstration, there is total expenditure of €91 million, while in County Mayo there is a total spend of €125 million when everything is counted, although County Wicklow has a bigger population. It is the same in the case of County Tipperary and County Galway. County Tipperary has a smaller population than County Galway, it has a spend of €135 million as opposed to €104 million in County Galway. There is the same trend if one matches Limerick city and county against Fingal. In the Fingal County Council area there was a 43% increase in population in the 20 years from 1996 to 2016, but it is one of the biggest contributors to the local government fund. In Limerick city and county there are nearly 100,000 fewer people, but the area has a greater expenditure amount from all sources. It is not a question of saying one county has plenty of commercial rates income, while another receives a greater amount from other facilities and services. It is looking at the total spend. The common denominator is that one county is disadvantaged dramatically if its population is growing. There are places that did not exist in 2000. They could not be modelled, but they are now subject to this baseline. What is being examined in the review of baselines? Is it the baselines in the distribution model that will be the central piece?

Mr. John McCarthy:

I cannot go into too much detail because it is being finalised with the Minister, but he will be making an announcement on it shortly. As there will be a consultation process, there will be an opportunity for the involvement of and an input from the general public and others. To refer back to the Deputy's point about population, it is one factor that can be taken into account. However, there is population distribution and the length of roads. When one looks back at the needs and resources model when it was put in place originally, up to 600 pieces of data fed into it and it became incredibly complex. One of the objectives we will be trying to achieve in the distribution exercise is trying to make it as fair as possible and equally trying to keep it as simple as possible because the complexity associated with the needs and resources model became unmanageable.

Catherine Murphy (Kildare North, Social Democrats)
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The lack of transparency and the effort one must make to understand some of this are not healthy. I believe it will expose the funding system, given that people were told that a certain amount of their local property tax would be retained. There was a big pitch that they would see improvements in their areas, whereas there was a diminution of the fund from the point of view of motor tax and local property tax became the exclusive part of the local government fund. On the idea that 80% is retained and the self-funding aspect, is it likely to feature in any review and will there be a requirement to self-fund things such as housing and roads projects? This row takes place every year. It happens more in Dublin City Council, for example, where €106 million is collected nationally in the self-funding area and €85 million is accounted for by the four Dublin local authorities. One hears the argument that money is being taken from initiatives to deal with homelessness, whereas that would not be a feature for the bulk of local authorities throughout the country. That is sending very strange messages about how local property tax is spent. Is the Department considering such matters with reference to the self-funding aspect? Does the Department of Transport, Tourism and Sport discount the self-funding aspects when considering the grants it pays to local authorities?

Mr. John McCarthy:

On the general point, I refer back to what I said to Deputy Shane Cassells. There are two dimensions. There is the overall pot of money available for allocation through the LPT and how it is to be allocated. Obviously, the 80:20 split and the self-funding aspects are critical parts of the current system. Therefore, if the overall pot of money does not change, if the 80:20 split is to change and if the level of self-funding required were to be reduced, that would mean that some local authorities would gain, while others would lose. These are issues that will have to be considered, as well as the implications of different approaches.

Mr. Graham Doyle:

The Department of Transport, Tourism and Sport allocates its funding for regional and local roads on a per kilometre basis within a local authority area. We then encourage local authorities to try to supplement it with their own funding. However, we apply our funding on a per kilometre basis in the first instance.

Catherine Murphy (Kildare North, Social Democrats)
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Does the Department also undertake an additional condition survey?

Mr. Dominic Mullaney:

No, it is not based on a condition survey. It is on a per kilometre basis. In the case of Dublin, it self-funds the main roads programmes.

Catherine Murphy (Kildare North, Social Democrats)
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Only a tiny amount of national road funding goes to Dublin. Is it channelled through Transport Infrastructure Ireland?

Mr. Dominic Mullaney:

National roads money is channelled through TII, while money for regional and local roads comes from the Department. However, in the case of the four Dublin authorities, unless they have a strategic project and small amounts for training, they do not receive moneys from us.

Catherine Murphy (Kildare North, Social Democrats)
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I have another question about needs and resources and modelling is being done. Is it intended to look at assets or needs and resources again or will an entirely different approach be taken?

Mr. John McCarthy:

Going back to what I said earlier, the objective will be to try to be as fair and as simple as possible. The more factors that one takes into account, the greater the complexity so we will be trying to get to a point where we have a set of factors that are taken into account that strike a balance between fairness and simplicity.

Catherine Murphy (Kildare North, Social Democrats)
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I suppose we will have to wait and see what the Minister has to say on that. There are places that have a dearth of public facilities because they have not inherited them. It is very difficult to count that. What one has not got is as much of an issue as what one has, in terms of modelling any fair funding system.

Seán Fleming (Laois, Fianna Fail)
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Deputy Cullinane is next.

David Cullinane (Waterford, Sinn Fein)
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Go raibh maith agat. I welcome Mr. John McCarthy, Mr. Doyle and Mr. Nolan from Transport Infrastructure Ireland to today's meeting. Mr. Nolan has been very quiet so far but we will have questions for him, no doubt. Happy International Women's Day to everyone. I will start by asking Mr. John McCarthy to outline the different funding streams for local government.

Mr. John McCarthy:

If the Deputy looks at the Comptroller and Auditor General's chapter-----

David Cullinane (Waterford, Sinn Fein)
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I have looked at it but am asking Mr. McCarthy to give me the breakdown.

Mr. John McCarthy:

Broadly speaking, local government is funded on a one-third each basis through rates, other local charges and central Government funding. In terms of funding coming from the centre, the most significant elements are the LPT allocations to local authorities which amount to approximately €500 million and the roads funding that comes from the Department of Transport, Tourism and Sport. There are some other smaller elements of central funding as well but they would be-----

David Cullinane (Waterford, Sinn Fein)
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They would be capital grants for projects-----

Mr. John McCarthy:

Yes.

David Cullinane (Waterford, Sinn Fein)
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The chart is very convoluted, is it not?

Mr. John McCarthy:

It certainly is convoluted. To go back to what I was saying to Deputy Murphy - this may be a challenge for the Comptroller and Auditor General when it comes to doing the 2018 version of this - but I would hope that through the changes we have made in terms of streamlining different lines of funding in 2018 that this chart may be a little bit less convoluted and complex than is currently the case.

David Cullinane (Waterford, Sinn Fein)
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I imagine that Mr. McCarthy would accept my analysis that it is very convoluted at the moment.

Mr. John McCarthy:

Absolutely, yes. The Comptroller and Auditor General has described it as being highly complex and I would not disagree with that.

David Cullinane (Waterford, Sinn Fein)
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That is an understatement because before this meeting today, I spoke to three different CEOs of local authorities to get their view of how they manage the different funding streams. They spoke of their frustration because they find it very difficult to plan or even to understand what funding might be available to them year on year. They also find it very difficult to report back to all of the different funders. They were all of the same opinion that they have many masters and each of the masters has different processes and ways of doing things in terms of accounting. My first general observation is that because it is very convoluted it can be very difficult to have high levels of transparency and accountability. Would that be something that the Comptroller and Auditor General would have been conscious of or alert to when he was preparing his report?

Mr. Seamus McCarthy:

That is exactly why I did the report. It was clear to me that there was an issue. I was struggling to understand the flows of funds and I would probably be closer to many of the accounts than anybody else.

David Cullinane (Waterford, Sinn Fein)
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I think it is safe to say that if the Comptroller and Auditor General was struggling to understand the flow of funds, then we have a real problem that needs to be addressed. Would I be right in suggesting that on page 125 of his report, the Comptroller and Auditor is referring to a collapse in funding for national roads or at least a substantial drop in funding? Would that be a fair analysis?

Mr. Seamus McCarthy:

It is certainly indicating a significant drop in funding.

David Cullinane (Waterford, Sinn Fein)
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When I spoke to the three CEOs of local authorities they all said that the collapse in roads funding is very serious for the State and for the local authorities. Roads must be maintained, as everyone knows, on a regular basis. If they are not maintained and if we do not wash their faces, so to speak, they can deteriorate. It can take up to five years but normally after three or four years we will have a problem if we do not maintain them. We have a problem now. If one drives in many rural areas, one will see the damage that has been done. Roads are subsiding, potholes are not being repaired and so on. The fact that we are not properly funding roads is a difficulty. In that context, I ask why there was a collapse in funding for roads and why the funding has not been sufficiently increased to meet demand. Has the Department of Housing, Planning and Local Government or any other Department done a cost analysis of not repairing the roads on an ongoing basis? What will it cost us if we allow the roads to get into such a state that after five years the work required to repair them is significant? Has anybody done that work, in terms of showing that not repairing them will cost us more in the long run? I will ask my former school colleague, Mr. Graham Doyle, to answer that.

Mr. Graham Doyle:

I would ask the Deputy not to hold that against me. We have done that analysis and the situation is exactly as the Deputy says. If we do not maintain roads at the necessary pace, eventually that catches up with us and causes great difficulty.

David Cullinane (Waterford, Sinn Fein)
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Where does the funding for roads come from? Who is the Accounting Officer for the funding of roads? Is it Mr. Doyle?

Mr. Graham Doyle:

Yes, the funding comes through our Department.

David Cullinane (Waterford, Sinn Fein)
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Where does it go?

Mr. Graham Doyle:

It goes to the local authorities for the regional roads and to Transport Infrastructure Ireland, TII, for the national roads.

David Cullinane (Waterford, Sinn Fein)
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We have the local authorities, the Secretary General of the Department of Transport, Tourism and Sport and TII involved here. We have a lot of different bodies dealing with the issue of roads. Why did we allow ourselves to get to a position where the funding was so low that we now have a major problem with roads? We are now getting to a point where it is going to cost us more in the long run because we have allowed a situation to develop whereby roads were not properly maintained.

Mr. Graham Doyle:

In the context of the economic situation facing the country over that period, the funding was not available to us. We took a period of time to highlight that. The Deputy may have heard me earlier refer to our analysis, the strategic framework for investment in land transport, which was precisely to highlight the issue that-----

David Cullinane (Waterford, Sinn Fein)
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Did Mr. Graham hear of the phrase "keep the recovery going"? Is that phrase familiar to him?

Mr. Graham Doyle:

The phrase is familiar to me, yes. The situation at this point is that roads funding is now increasing-----

David Cullinane (Waterford, Sinn Fein)
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By how much?

Mr. Graham Doyle:

In 2018 our total roads funding will increase to approximately €880 million from approximately €760 million in 2017. We are now in a position where the funding of roads is increasing again. Over recent years we have sought to highlight exactly the point that Deputy Cullinane made earlier. One often gets a better hearing when one is seeking to put new infrastructure in place; it is slightly less glamorous to argue for the maintenance of the infrastructure that is already there. That was something that we were very anxious to do in recent years and that was the purpose of the aforementioned report. The aim of that framework document was to highlight this very issue and ensure that when we got to the point in the year where we were negotiating through the budgetary process for funding for roads and capital investment, the issue of roads maintenance was taken very seriously.

David Cullinane (Waterford, Sinn Fein)
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I would suggest to the Cathaoirleach that it should also be one of the issues that we highlight for our periodic report. I do not think that the increase in funding will meet the backlog of work that needs to be done, not to mention the ongoing needs. Roads must be maintained on a daily, weekly and yearly basis and we obviously have a big challenge in that regard. I accept what the Secretary General has said.

I ask Mr. John McCarthy to explain "general purpose" funding for local government.

Mr. John McCarthy:

The general purpose grant was the precursor of the LPT allocation. Once the LPT was introduced in 2014, it replaced the general purpose grant.

The general purpose grants were the State's contribution to the running costs of local authorities.

David Cullinane (Waterford, Sinn Fein)
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Was that substantially cut in recent years?

Mr. John McCarthy:

If the Deputy can bear with me for one moment.

David Cullinane (Waterford, Sinn Fein)
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Would it be fair to say general purpose funding basically funds the nuts and bolts of local government operation?

Mr. John McCarthy:

It would be a contribution towards it, certainly.

David Cullinane (Waterford, Sinn Fein)
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It was cut substantially.

Mr. John McCarthy:

It was cut. However, the most significant cut though would have been between 2013 and 2014. That reflected the movement of water costs from local authorities to Irish Water.

David Cullinane (Waterford, Sinn Fein)
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However, it was not solely because of that but it certainly was cut and has it-----

Mr. John McCarthy:

The change from 2013 to 2014, in that year-----

David Cullinane (Waterford, Sinn Fein)
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In that year, yes.

Mr. John McCarthy:

-----was specifically for that.

David Cullinane (Waterford, Sinn Fein)
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Is funding for that general purpose fund increasing year-on-year now?

Mr. John McCarthy:

It has being replaced by local property tax, LPT. I think the LPT allocations in 2016 were €453 million and €517 million, and €504 million for this year.

David Cullinane (Waterford, Sinn Fein)
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While the witness is on the LPT-----

Mr. Seamus McCarthy:

I would like to point out that some of the LPT is allocated for housing and for roads. To do the comparison, if we look at the screen, we try to separate out the element that was allocated to roads, so the LPT allocation is around €310 million for general purposes or unspecified purposes. There is an unusual figure as well in 2016. If we look on the previous row, on miscellaneous services, there is a figure of €99 million which is high relative to previous years. An element of that, I think, would be for what are typically general purposes payments. They are related to one of the pay agreements, Lansdowne Road.

David Cullinane (Waterford, Sinn Fein)
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Would it be right to say Mr. McCarthy, I do not want to be unfair to the Accounting Officers or Government, that the general purpose fund was cut. It was replaced with funding from the LPT. Is there still a significant shortfall? Is there still a significant gap between what was there in the past and what is there now, given the replacement that took place?

Mr. Seamus McCarthy:

If we have LPT allocations of around €300 million and if the change for taking out the water services was around €400 million, which was the change between 2013 and 2014, then it is about the same level on a like-for-like basis.

Mr. John McCarthy:

There would be a small gain. If we look at the decisions local authorities have made in terms of LPT for 2018, the overall allocations of LPT is €504 million. If we take out the baselines, which would have worked back to the general purpose grant, there is about €355 million. If self-funding is taken out, which local authorities are now required to do for certain programmes, there would be a net increase of about €40 million.

David Cullinane (Waterford, Sinn Fein)
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I thank Mr. McCarthy for that. I have one question on the local property tax and I want to put a number of questions then about what I see as the disjointed funding of local government and the convoluted methodology, the impact it has on local government and indeed the development of cities and towns. I will get to that in a few minutes.

On the LPT, the equalisation process was put in place to support weaker local authorities. Can Mr. McCarthy tell me what local authorities were supported, how much they were supported by and if the equalisation process for those local authorities has worked?

Mr. John McCarthy:

Equalisation has been a concept since 2000 and 2001. I do not have information going back that far but I think we have some summary information for 2003. After the crash in 2008, everything was being cut back at that stage. Even after that, there was still a small slice of the cake set aside for equalisation. However, looking at the years 2003 to 2007, when things were supposedly on the up, over those five years about €66 million of funding was earmarked for equalisation purposes.

If we look at how that was distributed, it was significantly distributed towards some of the more rural local authorities. I refer to Donegal County Council, Galway County Council, Mayo County Council-----

David Cullinane (Waterford, Sinn Fein)
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I thought it might be helpful because I want to get to the other questions-----

Seán Fleming (Laois, Fianna Fail)
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The Deputy will get a second chance on this later.

David Cullinane (Waterford, Sinn Fein)
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I have one more question. It might be helpful to move this issue on if Mr. McCarthy could write a note for the committee. I ask specifically when the equalisation process came in, where the funding went to and what counties benefited. I would also like a breakdown of the per capitaspend for each of those local authorities. That is where we will see whether those local authorities are getting the support they need or whether they are still being disadvantaged. If the witness could come back to us with a note on that, perhaps we could follow up.

I want to make a broader point on the disjointed nature of funding. The reason I spoke to the three chief executive officers, Mr. McCarthy and Mr. Doyle is to get a sense of whether we are empowering local government to develop towns and cities. I am from Waterford. Many of the big developments that took place in Waterford recently were actually driven by local authorities. However, all of the chief executive officers I spoke to said local government funding mechanisms can frustrate and hold back reaching the potential that cities have and making decisions that have to be made in real time. It can take two or three years, for example, from applying for funding to actually getting it.

Some local authority chief executives have to take risks. Sometimes, they spend money on the basis that they might or might not get money. Mr. Doyle will be familiar with the example of the Waterford Greenway. Everybody now says it is a fantastic project, which it is, and everybody wants to take credit for it. However, Waterford City and County Councils was left holding the baby with the cost. It invested in the Greenway at significant risk to the Council. It was left with a significant shortfall between the cost of the Greenway and what it got from the Department of Housing, Planning and Local Government because in the end the level of funding the Council hoped for did not materialise.

Similar examples could be given. I am not sure if Mr. McCarthy is aware of the Carrickphierish project in Waterford. A new neighbourhood is being developed. The chief executive officer told me the difficulty and frustration he had having go to all of the various different Departments and agencies. They were all working in silos, and not to the project he was working to. They ended up with a neighbourhood without a library and without proper services because of the disjointed nature of the funding.

Mr. McCarthy raised issues from an accounting perspective in respect of trying to understand how it all works. It has an impact on the ability of local authorities to deliver projects. Sometimes initiatives have to be taken in real time. If they are not, then opportunities are lost. I would like Mr. Doyle to answer the question in respect of the Waterford Greenway, because it is still a sore point for those in the local authority who took a risk. I ask Mr. McCarthy to address the example I gave of the Carrickphierish project in Waterford, but also more generally because the convoluted system of funding can and does impede, hamper and hold back vision in local government. I will leave it there and come back later. I know that was a long contribution but I felt it needed to be made.

Mr. Graham Doyle:

On the issue of the Waterford Greenway funding, the Department puts out calls to local authorities across the country at certain junctures when funding is becoming available to invest in greenways. It is a competitive process and each application goes through an assessment process. In the Waterford case, the Council planned to develop what is an excellent greenway through a number of phases. From recollection, I think it may have been three phases.

In respect of the first phase and the second phase, the local authority went through that process and was awarded some funding under both. If I am correct in my recollection, I think it was the chunk in the middle which was actually the-----

David Cullinane (Waterford, Sinn Fein)
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Had the witness any correspondence from or discussions with the chief executive officer of Waterford City and County Council in respect of frustrations the Council had with the funding?

Has Mr. Doyle had any interaction with the council?

Mr. Graham Doyle:

I have, yes.

David Cullinane (Waterford, Sinn Fein)
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Did it express frustration?

Mr. Graham Doyle:

It did not. The council decided to develop the final section of that greenway separate to the process in which it was previously involved with us and others. It sought to retrospectively fund that------

David Cullinane (Waterford, Sinn Fein)
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Would it be fair to say that if it had stuck to the very convoluted process that was in place we would not have the fantastic greenway we now have? It is only because the CEO of the local authority took a risk rather than stick to the process as outlined by the Department that the job was finished and we have the greenway.

Mr. Graham Doyle:

We go through a competitive process with the various applications we receive for greenways. When we have funding available, we look at the projects that have been put forward and assess them against each other. In the case referred to by the Deputy, the local authority came to us and said it had built the greenway. It spent a significant amount of money and delivered a high-quality project but the spend was in excess of what we had available for several such projects at the time and it was not possible to retrospectively fund the final stretch, to the great disappointment of some officials in my Department who hugely admired and appreciated the quality of the final product.

David Cullinane (Waterford, Sinn Fein)
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Perhaps Mr. McCarthy will address the other point I raised.

Mr. John McCarthy:

We will prepare a note for Deputy Cullinane regarding equalisation. On the issue raised of per capitaspends per local authority, the Deputy should not be surprised to see that it does not tally because equalisation was very often a specific intervention to deal with a local issue such as, for example, the closure of a big factory and a resultant significant loss of rates which would put a hole in the budget of the local authority. It would not just------

David Cullinane (Waterford, Sinn Fein)
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There may be many caveats on the issue but if Mr. McCarthy produces the figures, we will sort out the caveats and make our own judgments and assumptions based on the figures with which we are presented.

Mr. John McCarthy:

Absolutely, that is fine. I wanted to ensure that was clear.

David Cullinane (Waterford, Sinn Fein)
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That is fine.

Mr. John McCarthy:

On the issue of frustrations in regard to projects such as that in Carrickphierish, as mentioned by the Deputy, as we move on with the implementation of the national development plan, the new urban and rural regeneration funds provided for in the plan will give a better mechanism to ensure more integrated urban development. That will proceed on the basis of a very planned approach and an understanding of the community and other infrastructure that need to be put in place, which will involve pulling together the relevant Departments with the intention of getting a better output. I too regularly talk to local authority chief executives, who express frustrations from time to time, which I understand. However, I tell them that there is a lot of money at stake and there are times when we must ensure we are doing everything we can to ensure value for money. I am rightly here today as Accounting Officer for that process. There is an inevitable tension with local authorities in that regard but we try to work as collaboratively as we can.

Catherine Connolly (Galway West, Independent)
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Ar an lá speisialta seo, lá idirnáisiúnta na mban agus is dócha go bhfuilimid ag déanamh dul chun cinn, tá cúigear as seachtar anseo os ár gcómhair so fáilte romhaibh. My questioning may be interrupted by a vote in the Dáil but there are many questions to be asked of the witnesses. I will stick to the issues of oversight, control, the audit service and the national oversight and audit commission and, it is to be hoped, housing and the underspend in that regard during a housing crisis.

Seán Fleming (Laois, Fianna Fail)
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I do not wish to cut across Deputy Connolly but the issue of housing is in the------

Catherine Connolly (Galway West, Independent)
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The Chair may stop me if my questions are inappropriate but I am sticking with-------

Seán Fleming (Laois, Fianna Fail)
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We have specifically indicated that we deal with Vote 34 - Housing, Planning, Community and Local Government after lunch.

Catherine Connolly (Galway West, Independent)
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I thought it may have been relevant under this section. In terms of oversight, certainly------

Seán Fleming (Laois, Fianna Fail)
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That may be discussed.

Catherine Connolly (Galway West, Independent)
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The question of oversight arises in this interaction. As one who, like Deputy Cassells, had the privilege or torture of serving on a city council for 17 years, my questions arise because I believe in city councils and democracy and have great respect for their staff, who are overworked, underpaid and continually moved from department to department. However, my opinion of the management of city councils is quite different. There were seven acting or full-time city managers in Galway between 1999 and 2013, which created its own problems, as the witnesses might appreciate. The Comptroller and Auditor General has produced a chapter regarding the Solas pictiúrlann, which issue was to have been last week discussed by the committee but was not. There has been major overspend in Galway on the Seamus Quirke Road, Eyre Square and the pedestrianisation of Galway city. Somebody made a mistake somewhere. It is falling apart. During my time on the council, we were told the matter of liability had been shelved in respect of the pedestrianisation of the city, which remains a huge problem. In that context, audits and this new commission are extremely important. It is the one thing which can give us hope in terms of accountability.

How many staff are assigned to the Local Government Audit Service? What complement of staff does it require? Does it have enough staff to carry out its work?

Mr. John McCarthy:

There are just under 40 staff but if one takes out the clerical support there are 34 professional auditors on------

Catherine Connolly (Galway West, Independent)
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What is the full complement required to carry out its work?

Mr. John McCarthy:

Sorry, there are 35 professional auditors currently working there, not 34.

Catherine Connolly (Galway West, Independent)
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Thirty-five.

Mr. John McCarthy:

That has been its approximate complement in recent times. It is in the process of recruiting further staff.

Catherine Connolly (Galway West, Independent)
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Because it needs more staff.

Mr. John McCarthy:

Yes.

Catherine Connolly (Galway West, Independent)
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How many more staff does it need?

Mr. John McCarthy:

It is looking for three more staff.

Catherine Connolly (Galway West, Independent)
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It needs three more. Are there arrears in terms of the number of audits it must carry out?

Mr. John McCarthy:

No.

Catherine Connolly (Galway West, Independent)
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No. It is up to date.

Mr. John McCarthy:

Yes. There was previously an issue in terms of the length of time after the end of the year. That improved very significantly in terms of the 2016 audits, with all bar one being completed by October of the following year.

Catherine Connolly (Galway West, Independent)
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They are audits of accounts produced by local authorities.

Mr. John McCarthy:

Yes.

Catherine Connolly (Galway West, Independent)
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How many value for money audits have been carried out? Are they discretionary?

Mr. John McCarthy:

They are discretionary but the audit service has adopted a strategy of working with local authorities to ensure that the audit process of the annual accounts can be completed in so far as possible by the end of September, which is in line with approach of the Comptroller and Auditor General. The balance of available resources in the year are then used for value for money examinations. It is discretionary but it becomes more and more a part of the process.

Catherine Connolly (Galway West, Independent)
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It is discretionary.

Mr. John McCarthy:

Yes.

Catherine Connolly (Galway West, Independent)
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How are those projects identified and how many have been carried out? Perhaps Mr. McCarthy could use Galway city or county, or both, as an example.

Mr. John McCarthy:

The value for money reports carried out are usually national reports and do not focus on a particular area of the country but, rather, on a service. Some 31 reports have been completed to date by the value for money unit of the Local Government Audit Service.

Catherine Connolly (Galway West, Independent)
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Is the value for money unit fully staffed?

Mr. John McCarthy:

Yes.

Catherine Connolly (Galway West, Independent)
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Does it need more staff?

Mr. John McCarthy:

It falls within the staffing figures------

Catherine Connolly (Galway West, Independent)
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It is within the figures provided by Mr. McCarthy.

Mr. John McCarthy:

It is part of the Local Government Audit Service.

Catherine Connolly (Galway West, Independent)
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It has carried out 31 value for money reports.

Mr. John McCarthy:

Thirty-one, yes.

Catherine Connolly (Galway West, Independent)
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And they are carried out on a theme.

Mr. John McCarthy:

On themes or particular service areas, different functional parts of the------

Catherine Connolly (Galway West, Independent)
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I ask Mr. McCarthy to give me a practical example of that.

Mr. John McCarthy:

One of the more recent reports was on the performance of local authorities in managing and maintaining their overall corporate estate-----

Catherine Connolly (Galway West, Independent)
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That is the oversight commission. That is a theme from the report of the national oversight and audit commission.

Mr. John McCarthy:

No, I am referring to value for money report No. 30 prepared by the Local Government Audit Service.

Catherine Connolly (Galway West, Independent)
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Okay.

Mr. John McCarthy:

Another recently concluded report dealt with the coroner service, which again is a local authority function but funding for which comes through the Department of Justice and Equality and other sources. They are two examples that-------

Catherine Connolly (Galway West, Independent)
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The review of the coroner service was a special value for money report.

Mr. John McCarthy:

Yes.

Catherine Connolly (Galway West, Independent)
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Was that in respect of coroner services in all local authorities?

Mr. John McCarthy:

Yes.

Catherine Connolly (Galway West, Independent)
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Which value for money report was initially mentioned by Mr. McCarthy?

Mr. John McCarthy:

The corporate estate. The management of local authorities' corporate estate, comprising buildings, yards and so on.

Catherine Connolly (Galway West, Independent)
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Their estates, yes. I beg your pardon. What are the most recent reports?

Mr. John McCarthy:

The report on the coroner service is the most recent.

Catherine Connolly (Galway West, Independent)
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How are those value for money audits selected?

Mr. John McCarthy:

There is a value for money committee comprising representatives of the audit service, the local government sector and the Department.

They identify what the areas of activity should be.

Catherine Connolly (Galway West, Independent)
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How do they identify them?

Mr. John McCarthy:

Materiality is one issue. For example, there would have been a view in the local government sector that a lack of funding and capacity to continue to operate the coroners' service was a significant issue. The materiality of that was a factor behind picking that one. Materiality would be a significant factor.

Catherine Connolly (Galway West, Independent)
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What else? What other criteria?

Mr. John McCarthy:

Pressures at any particular point in time. They would have done a report relatively recently, albeit I cannot remember exactly which year, on the relationship between the local authority and the approved housing bodies. Again, housing and the development of housing represent a particularly critical issue at this point in time. That would have been a factor.

Catherine Connolly (Galway West, Independent)
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I will use parochial examples, but they have a general implication. For example, the pedestrianisation of Galway city was shelved - the liability was shelved. Would it have occurred to anyone to do a value for money audit of that? There were a lot of complaints about it at the time and it remains a mess. I am not given to exaggeration; it remains a total mess and the precise wording was: "We have shelved the issue of liability for the moment". Here we are in 2018. What about a value for money audit?

Mr. John McCarthy:

Ordinarily, specific local authority issues are dealt with as part of the auditor's report back to the councillors on that authority. I am not familiar with the particular example to which the Deputy refers but those specific local authority issues should form part of the normal audit if they are of a material variety.

Catherine Connolly (Galway West, Independent)
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Are the special or value for money ones more a national thing?

Mr. John McCarthy:

They are more a national perspective, yes.

Catherine Connolly (Galway West, Independent)
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If we go back to Solas, which will come before us with the other Department, there is an absolute lack of oversight by the Department. It ended up as a special chapter from the Comptroller and Auditor General. How can that happen if the overall audit system is working?

Mr. John McCarthy:

I am not familiar with the Solas one.

Catherine Connolly (Galway West, Independent)
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It comes directly under Mr. McCarthy's Department. I know we are coming back to it separately and we were to deal with it last week. However, I raise the issue of oversight where public moneys are given for projects. Where does it come-----

Mr. John McCarthy:

The funding for that came-----

Catherine Connolly (Galway West, Independent)
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From a different Department.

Mr. John McCarthy:

-----through a different Department.

Catherine Connolly (Galway West, Independent)
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So, the Department would not have been able to-----

Mr. John McCarthy:

Galway City Council provided funding from its own resources.

Catherine Connolly (Galway West, Independent)
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I understand that. I was there. However, the vast bulk of it came from the Department with responsibility for the Gaeltacht.

Mr. John McCarthy:

Arts and heritage, I think, Deputy.

Catherine Connolly (Galway West, Independent)
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Mr. McCarthy's Department would have no say in that.

Mr. John McCarthy:

No.

Catherine Connolly (Galway West, Independent)
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In relation to the National Oversight and Audit Commission, this was a new dawn in July 2014. It is another body overseeing things so that we have accountability, which I welcome. I welcome accountability. The commission has produced 11 reports. Has it?

Mr. John McCarthy:

It is 14 at this stage.

Catherine Connolly (Galway West, Independent)
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What findings and recommendations have emerged from those reports?

Mr. John McCarthy:

A number of those reports are annual performance indicator reports. As such, they look across a whole range of activities and try to demonstrate in a local authority way but also in a comparative way the performance of local authorities under a range of headings.

Catherine Connolly (Galway West, Independent)
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I see that fig. 8.11 has set out the reports on page 130 of Chapter 8 of the Comptroller and Auditor General's report.

Mr. John McCarthy:

There are 11 there, but there have been three more since that was published.

Catherine Connolly (Galway West, Independent)
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What is emerging from those, what are the recommendations and, more important, what has the impact on local authorities been and how are they being held to account?

Mr. John McCarthy:

I will take one example, which is the second last one on the list in fig. 8.11, namely the private or intersectoral review. That showed a very uneven performance in terms of local authority inspections of private rented accommodation. To the extent that there are issues emerging from reports of this kind that require us to look at policy, legislation or funding, the Department does that. As such, when we formulated the strategy for the rental sector in December 2016, we drew in a great deal of what the report was saying around the need to set specific targets for local authorities around private rental sector inspections and, more important, the need to provide specific funding to local authorities. That is now moving forward and funding has been provided for. That is just one example.

Catherine Connolly (Galway West, Independent)
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The one after that is a review of the maintenance and management of local authority housing. Can Mr. McCarthy clarify what the Department has learned from that?

Mr. John McCarthy:

From memory and with the assistance of my colleague, I note that exercise built on the report referred to above it, namely the local authority tenant satisfaction survey, which was carried out first to get a perspective from the customer's point of view. It actually yielded positive results in terms of local authority tenants and the extent to which they felt the local authority was managing their accommodation properly. On the review of the management and maintenance of local authority housing, more specifically, the purpose of the report was to identify best practice and roll it out across the local authority housing system. We were particularly concerned about the extent to which there was a need to intervene with central government funding to bring long-standing vacant properties back into use. This is now designed to be a platform which we will need to take forward to ensure that ongoing planned management and maintenance by local authorities gets us to a point where we should not really need to provide significant capital funding. In effect, the stock and the assets should not deteriorate in the way they have previously.

Catherine Connolly (Galway West, Independent)
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That is very important and I appreciate it. On that level, the policy is good. On the ground, however, I take the example of Galway again. I live in the Claddagh area where there is a house which has been empty for almost two years for no reason. I will give some examples and then relate them back to the general position. That house has been empty for almost two years and I pass it regularly. I have checked and been told that it is allocated but not occupied. We are into the language of Kafka as to the reasons it might be empty. One finds it is not really empty in that it has been allocated but one then realises it is not occupied. At any given time in Galway, we have 70 empty houses. We have an oversight body looking at how to improve things, but at any given time we have 70 empty houses. Some of that is due to major refurbishment, but most of them are empty for no good reason. I am trying to relate the practice on the ground to the theory. No house should be empty for longer than three or four weeks before it is turned over and allocated. This is an example from a major city during a major housing crisis. We have an oversight audit commission, an audit system and, at any given time, that number of empty houses. Where does the Department come in?

Mr. John McCarthy:

Where the Department comes in goes a little bit back to what I was saying about the private rented sector and what we might now move into in terms of management and maintenance. We may set specific targets and have reporting done versus those targets to ensure that those situations the Deputy identifies can be flagged and responded to at local level.

Catherine Connolly (Galway West, Independent)
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I welcome that as a reply but it is now 2018 with the most serious emergency. I sit here as a representative saying that is the level of empty houses and Mr. McCarthy is just saying "flagged". These have been flagged for years.

Mr. John McCarthy:

I was leaving my housing stuff to the afternoon but as the issue has been raised, I do not want the Deputy to have a sense that we are only now thinking about vacant local authority housing. We have put a significant amount of money into bringing void housing back into use over the last three years in particular and a very significant number of units have been brought back. Clearly, the Deputy is pointing to a particular example of a house in the Claddagh which has been vacant for a long time. I do not know the circumstances of that.

Catherine Connolly (Galway West, Independent)
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I am only using one example out of 70 at any given time. I hear about all of this money and I welcome it, but the reality on the ground is so far removed from what has been said. I am not given to exaggeration. I will come back to it if I am straying onto something that-----

Seán Fleming (Laois, Fianna Fail)
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Housing is specifically in the afternoon session.

Catherine Connolly (Galway West, Independent)
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That is fine.

Seán Fleming (Laois, Fianna Fail)
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We are dealing with transport and roads while the transport people are here.

Catherine Connolly (Galway West, Independent)
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That is lovely. That is fine. I go back to transport. The funding for local authorities has been dealt with by other colleagues here.

We met Mr. Paul Lemass at a meeting recently on the funding of the county councils, at which it was pointed out that Galway County Council is the third lowest funded local authority in the country due to the formula that is used. There was to be a follow up on that issue. I know my colleague might have a more nuanced approach to it. We are being told by the county manager that Galway County Council simply cannot go on with the level of funding it is receiving. That impacts at a meaningful level in people's lives and we see that basic roads in Connemara are falling apart. I do not want to be parochial. I am raising the matter as an issue of funding for a local authority by a formula that is Kafkaesque, leaving the county council as the third lowest funded county council in the country, in a position that it cannot repair that road because it does not have sufficient funding.

Mr. John McCarthy:

When I was responding to Deputy Catherine Murphy, I indicated that the general purpose funding, which is the allocation mechanism for the running costs of the local authorities will be the subject of a review. In terms of roads, specifically-----

Catherine Connolly (Galway West, Independent)
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When we met Mr. Paul Lemass, I understood the review was in respect of the local property tax. Will there be a major review on the allocation?

Mr. John McCarthy:

Deputy Connolly may not have been present, when I was responding to Deputy Cassells, and spoke of the two processes. When the Deputy met my colleague previously, the overall review of the local property tax that the Minister for Finance had announced was in play but I was saying earlier that it was one piece of the jigsaw, the other piece is how the pot of money which becomes available through LPT is to be distributed. We will commence a review of that.

Catherine Connolly (Galway West, Independent)
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When is that going to commence?

Mr. John McCarthy:

Very shortly. It is with the Minister at present. He will make an announcement shortly.

Catherine Connolly (Galway West, Independent)
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Is it decided when the review will commence?

Mr. John McCarthy:

I cannot give the details before the Minister has signed off on them. I am trying to be as helpful as I can, but there will be more information shortly.

David Cullinane (Waterford, Sinn Fein)
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That makes it six-nil.

Mr. John McCarthy:

The ultimate success story for an Accounting Officer.

Shane Cassells (Meath West, Fianna Fail)
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The afternoon is only getting started. There is plenty of time.

Catherine Connolly (Galway West, Independent)
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Will the library service be dealt with in the afternoon?.

Seán Fleming (Laois, Fianna Fail)
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In the afternoon session, we will deal with housing, planning, community and local government.

Catherine Connolly (Galway West, Independent)
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Thank you Chairman. Will somebody enlighten me on transport and public transport strategies in Galway, because the city is choking at the seams?

Mr. Graham Doyle:

Various agencies as well as the local authorities deal with transport. There are city grants and sustainable project funding distributed through the National Transport Authority. I know that Galway and other cities have benefited from various programmes.

Catherine Connolly (Galway West, Independent)
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In his opening statement Mr. Doyle referred to public transport special projects.

Mr. Graham Doyle:

I am not sure to what the Deputy refers.

Catherine Connolly (Galway West, Independent)
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I was wondering what Mr. Doyle referred to, perhaps I have got it wrong.

Mr. Graham Doyle:

There is a range of city-based schemes that-----

Catherine Connolly (Galway West, Independent)
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There is a reference to limited funding for new transport projects in his address.

Mr. Graham Doyle:

That specifically refers to roads projects. It was related to a study that was primarily looking at the need to maintain the road network we have got quite separately from the need to invest in further pieces of infrastructure.

Catherine Connolly (Galway West, Independent)
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Mr. Doyle also refers to a map roads project that helps local authorities to monitor and track the performance of the road networks. Will Mr. Doyle elaborate on that please?

Mr. Graham Doyle:

Yes, that is a system that helps the local authorities deal with assessing the quality of pavement of the roads in the local authority area and allows them to deal with issues such as working with the utility companies in terms of accessing the roads for utility-related works that need to be done.

Catherine Connolly (Galway West, Independent)
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So it is not a project on the status or the maintenance of the road, but the utilities using the road.

Mr. Graham Doyle:

It has to do both with assessing the state the road is in at a point in time and it also relates to the utility companies accessing the roads for the works they do.

Catherine Connolly (Galway West, Independent)
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I thank the witnesses.

Seán Fleming (Laois, Fianna Fail)
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At this stage, I will suspend the sitting because of voting in the Chamber and to allow members to have a bite to eat.

We have not completed this session yet as we must deal with the funding of local government and the collection of motor tax before proceeding to the second session.

Seán Fleming (Laois, Fianna Fail)
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We will resume our discussion on the central government funding of local authorities. We are joined by officials from Transport Infrastructure Ireland and the Department of Transport, Tourism and Sport because they both fund the local authority's regional and national roads. We have one or two questions on the special report on motor taxation. We will then follow on with the second part of the meeting, which I hope will be the shorter half. Deputy Deering had indicated.

Pat Deering (Carlow-Kilkenny, Fine Gael)
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I welcome the witnesses and compliment them on the work in the past week. I want to focus on the local property tax and how it is distributed to local government. I welcome Mr. John McCarthy's repeated reference to fairness and that a review of the distribution process would proceed. Will he describe how the model for the distribution of local property tax was developed in the first place?

Mr. John McCarthy:

I thank Deputy Deering. May I clarify that he wishes me to describe the model for the local property tax when it was introduced in 2014?

Pat Deering (Carlow-Kilkenny, Fine Gael)
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Yes. How was the model for the distribution of funding developed?

Mr. John McCarthy:

All right. There were a few things happening at that time. The starting point would have been the general purpose grants, GPG, as they stood at that point in time. The water related costs were stripped out of the general purpose grants on the basis that these costs were being transferred across to Irish Water. That left a figure of the net GPG minus the water costs for each local authority. When it came to deciding how the proceeds of the local property tax would be distributed, one of the key planks of the policy decision that was made at the time was that no local authority should be worse off under the new regime than under the previous one.

LPT was collected in many local authority areas. Some authorities would have been worse off compared to the previous regime and others would have been better off. One of the key planks of the policy decision was that nobody should be worse off. The decision taken was that 80% of LPT in a local authority area would be retained in that area, while the balance of 20% would go into an equalisation fund. That 20% was then used to bring up the local authorities that would have been worse off, bringing them back to where they would have been if they system had not changed. A supplementary contribution from the Exchequer was also needed to make sure that this could be done. From memory, that brought 19 or 20 local authorities back to an equivalent position to what they would have been in if the system had not changed. Then there was a balance of 10 or 11 local authorities that were in a surplus situation. The policy decision that was made, taking account of the constrained financial circumstances of the State at the time, was that to the extent that any local authority had a surplus of that kind, it could retain an amount equivalent to 20% of the yield in its area for its own purposes and the balance of 80% would, in effect, be used to replace Exchequer funding, primarily for housing but also with a certain amount for roads.

Pat Deering (Carlow-Kilkenny, Fine Gael)
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I am not sure Mr. McCarthy is getting my question. I want to know exactly what model is used to distribute the money. I will give an example. I am from Carlow. The argument is made time and time again that Carlow is treated very unfairly. Carlow has a budget of €49 million and a population of 56,000. By comparison, Monaghan has a population of approximately 57,000 or 58,000. Carlow's contribution from the local property tax is €3.9 million and Monaghan's is €3.8 million - they are quite similar. However, Carlow gets a top-up of €2.2 million and Monaghan gets a top-up of €7.5 million. How do the officials calculate that?

Mr. John McCarthy:

It all relates back to the situation that each area would have been in before LPT was introduced. The starting point was the GPG that each local authority had at that point. Take out the water-related costs, and every local authority had, at a minimum, to transition to the new LPT-based system without being worse off. It would have been a comparison from one to the other to get each local authority back into that situation of being no worse off.

Pat Deering (Carlow-Kilkenny, Fine Gael)
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However, it is obvious that they are worse off.

Mr. John McCarthy:

No. In the context of the transition from GPGs to LPT, there is no local authority worse off from that particular stream of funding. Obviously, there is other funding in respect of rates and all that. As far as the GPG is concerned, there is no local authority that is worse off.

Pat Deering (Carlow-Kilkenny, Fine Gael)
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Mr. McCarthy also mentioned earlier that his Department is reviewing the system of distribution. In order to make it fairer and more transparent, which I think everybody has mentioned previously, what models are being considered? The officials are probably limited as to what they can tell us but I am sure indicate the models that are being investigated.

Mr. John McCarthy:

I cannot give the Deputy too much information at the moment on the basis that it is something the Minister needs to finalise and announce. Part of the process will be to identify the factors that will bring us as much as possible to that sort of an outcome. In other words, what variables should be fed into the equation in order to determine what comes out the other side.

Pat Deering (Carlow-Kilkenny, Fine Gael)
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Regarding the commercial rates, the biggest mistake was made in 1977 - over 40 years ago now - when domestic rates were abolished. That was a political decision, I suppose, and local authorities have never recovered. It is important that there is a broader based way of getting funding. As regards commercial rates, I do not mean to be parochial but, for example, the biggest employer in Carlow town in Carlow Institute of Technology. It employs approximately 700 people but it is not rateable. There are no other tools, so to speak, in Carlow for generating income. Like a lot of other towns, it lost a number of industries in recent years, such as the sugar industry and so on. There are no other ways of generating income with the exception of the plus or minus up to 15% of LPT. What other models can be considered with regard to broadening the income base over the coming period?

Mr. John McCarthy:

It is a policy matter as to what potential revenue sources could be deployed, either by local or central government. Operating within the policy parameters that are in place, the Deputy mentioned plus or minus 15% in respect of LPT. Further progress on the actual collection of rates versus the amount that is levied could be made. Some local authorities have made a lot of progress in that space, while others can make further progress. One of the other mechanisms that is available within the rating space is the whole treatment of things like vacancy, and decisions that can be made as to the extent of vacancy refunds. After that, it is really a policy question as to what alternative funding sources could be brought into the frame for local or, indeed, central Government.

Pat Deering (Carlow-Kilkenny, Fine Gael)
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In the context of roads, a number of different schemes were in place a couple of years ago for which local authorities, in conjunction with the Department, were responsible. There was the local improvement scheme, LIS, and the community involvement scheme, CIS, for example, which had to do with local third-party roads. Would they have been coming out of the main budget initially?

Mr. John McCarthy:

I will defer to my colleague. I do remember the LIS from about 20 years ago but, to make sure the Deputy gets a more up-to-date answer, I will ask our colleagues from roads to respond.

Mr. Ray O'Leary:

Ultimately, all the funding comes out of the same pot. The LIS and CIS were suspended in the face of the significant reductions in available funding for roads. We introduced the CIS - which, in a sense, leverages private contributions for work on public roads - for the first time this year as a stand-alone scheme. The schemes always existed as an option for local authorities, and the Minister, Deputy Michael Ring-----

Pat Deering (Carlow-Kilkenny, Fine Gael)
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Did the funding come out of their budgets initially prior to 2018? Was there provision made that a percentage could be taken out of their budgets?

Mr. Ray O'Leary:

It is either taken out of the budget at local authority level or at the central level. Ultimately, it is the same budget. The Department of Rural and Community Development, under the Minister, Deputy Michael Ring, is now funding local improvement schemes where the funding is for private roads. It is no longer under the Department of Transport, Tourism and Sport.

Pat Deering (Carlow-Kilkenny, Fine Gael)
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Was there initially a budget for those schemes coming out of the main roads allocation budget?

Mr. Ray O'Leary:

Yes. They were all within the overall roads budget. In the context of the overall cuts, it was decided to devolve prioritisation between mainstream road funding and CIS or LIS-type projects to local authorities in order that they could make decisions at local level as to what was appropriate. In line with commitments in the programme for Government, the CIS has been reintroduced this year and the Department of Rural and Community Development is now funding the LIS.

Mr. Ray O'Leary:

I am sorry but could the Deputy repeat his question?

Mr. Ray O'Leary:

As I said, the LIS is no longer being funded by the Department of Transport, Tourism and Sport.

Mr. Ray O'Leary:

It was up to local authorities themselves to decide if they were willing. The LIS-type funding was available as an option for local authorities to use out of their overall grant for regional and local roads. We did not carve out the money at the centre or have it managed centrally. It was part of the overall pot local authorities could choose to fund depending on what the demands were in the local area. The same applied to the community involvement scheme.

Mr. Dominic Mullaney:

That was probably the original intention. It is generally spent on local secondary and tertiary roads but one might equally have a housing estate where it is also applicable. One is possibly less likely to get a community involvement or contribution there.

Mr. Dominic Mullaney:

I see the issue. As Mr. O'Leary said, prior to last year, a local authority could spend up to 15% of its discretionary grant on local improvement schemes. The Dublin authorities were not getting a discretionary grant so did not have the wherewithal to take it from that fund. It could not be done unless they decided to use their own resources to do so. They did not have any possibility of taking it from one of our grants because they were not getting a grant from us.

Mr. Dominic Mullaney:

I suspect that they probably are eligible since 2016, when it was reintroduced by the Minister, Deputy Ring.

Mr. Ray O'Leary:

Unfortunately, we are not in a position to answer questions about the criteria used by the Department of Rural and Community Development.

Mr. Ray O'Leary:

That is funded from the sports budget of our Department.

Seán Fleming (Laois, Fianna Fail)
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We are only dealing with local government today.

Mr. Dominic Mullaney:

Yes, we can do that.

Seán Fleming (Laois, Fianna Fail)
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We have nearly finished in this section. We have still to come to housing and planning in the second part of the meeting. We will have one or two more questions and then we will finish this section.

Catherine Murphy (Kildare North, Social Democrats)
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I have some questions regarding roads. The witnesses said that Dublin self-funds roads. Is that the case for the four Dublin local authorities?

Mr. Ray O'Leary:

Yes, that is the case for all four Dublin local authorities.

Catherine Murphy (Kildare North, Social Democrats)
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Do any other local authorities self-fund?

Mr. Ray O'Leary:

Cork city is largely self-funding, as is Cork county.

Catherine Murphy (Kildare North, Social Democrats)
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When Mr. O'Leary says they are largely self-funded, how is that determined?

Mr. Ray O'Leary:

I will hand over to my colleague for the detail on it.

Mr. Dominic Mullaney:

I am unsure of the exact figure, which we can get for the Deputy, but the figure for self-funding is less than €1 million.

Catherine Murphy (Kildare North, Social Democrats)
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What is the criteria to determine that they self-fund?

Mr. Dominic Mullaney:

We liaise with the Department of Housing, Planning and Local Government to establish how much self-funding occurs each year in housing and in roads.

Catherine Murphy (Kildare North, Social Democrats)
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It goes back to the baselines.

Mr. Dominic Mullaney:

Yes, it does. In terms of the Dublin local authorities, it is straightforward. The initial self-funding is all taken from roads but in the case of certain counties, Cork county just happens to be the one involved, there is a balancing figure. The housing figure is taken out first and at the end there is a balancing figure which can change from year to year.

Catherine Murphy (Kildare North, Social Democrats)
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How is that determined? They are not the only local authorities that fall under the self-fund category under the local property tax, LPT. How does one decide on the balance between housing and roads?

Mr. John McCarthy:

When that balance was initially set, the Government decided that there were certain housing programmes that should not be self-funded and should continue to receive full Exchequer funding. A pot of self-funding had to be achieved which we applied to housing programmes as far as we possibly could but there was further self-funding in some local authorities areas that needed to be recovered. That is where roads came in.

Catherine Murphy (Kildare North, Social Democrats)
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Does the self-funding aspect of all this relate only to the funding which comes through the local property tax, or local government fund.

Mr. John McCarthy:

Yes.

Catherine Murphy (Kildare North, Social Democrats)
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Local property tax is self-funding things that would be paid for in other local authorities if there was not-----

Mr. John McCarthy:

Yes, if there was not a surplus of local property tax in that area.

Catherine Murphy (Kildare North, Social Democrats)
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And that surplus goes back to the baseline being inappropriate.

Mr. John McCarthy:

Exactly.

Catherine Murphy (Kildare North, Social Democrats)
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The witnesses said that they allocate road grants based on road length. Does road usage come into it? There is a world of difference between a road that is used by HGVs, for instance, in terms of the damage they do compared to a little rural road.

Mr. Ray O'Leary:

It is difficult to aggregate that with any great precision across a whole local authority area. It is funded by kilometre length. There is an adjustment factor in Kildare and Meath as part of the greater Dublin area, because they will carry a greater share of heavier traffic flows on the local and regional roads. That is the basic model. While no model is perfect, unlike some of the comments on local authority funding, at least it has the benefit of being relatively transparent and accountable, since we know what the kilometre road length is. Generally, local authorities would be positive about it as being a reasonably fair allocation method.

Catherine Murphy (Kildare North, Social Democrats)
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That is a very sweeping statement. I expect if one was to ask local authorities, depending on whether one was speaking to the road engineer or the councillors, one might find a different response.

We heard this morning that condition surveys are done for national roads. Why are they not done on local roads?

Mr. Ray O'Leary:

Condition surveys are done on local regional roads.

Catherine Murphy (Kildare North, Social Democrats)
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I was told the opposite this morning.

Mr. Ray O'Leary:

Condition surveys are done on local and regional roads. The Deputy might remember that the Secretary General mentioned the map road system which, among other things, allows for uploading and storage of the results of condition surveys so that when local authorities are undertaking their repair and maintenance programmes, they can prioritise it by the condition of their local and regional roads.

Catherine Murphy (Kildare North, Social Democrats)
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I want to be clear on this. The Department allocates the grants based on road kilometres. It does condition surveys but they do not determine the level of road grants. Is that correct?

Mr. Ray O'Leary:

Sorry, the local authorities, as the road authorities, do the condition surveys. When they are prioritising within their local budget for roads-----

Catherine Murphy (Kildare North, Social Democrats)
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Say there is a county where the roads are in a disastrous condition, but there are not that many roads, they get allocated funds by kilometre. If every road needs to be repaired, it is still paid the same per kilometre as another county where the roads are in pretty good condition.

Mr. Ray O'Leary:

To be frank, that would be the case. I am not aware of any county where the roads are in that good a condition. Certainly, in our engagement with local authorities and people on the ground-----

Seán Fleming (Laois, Fianna Fail)
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We will try to wrap up on the transport side of the meeting, but first I will call Deputy Cassells.

Shane Cassells (Meath West, Fianna Fail)
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On the local improvement scheme, LIS, have there been changes to the scheme for this year in terms of how projects are approved?

Mr. Ray O'Leary:

As I outlined earlier, the local improvement scheme is now funded by the Department of Rural and Community Development. The Department of Transport, Tourism and Sport no longer awards funding to this scheme but, as noted by Mr. Mullaney, local authorities have the option of allocating a slice of the annual funding allocations provided to them by the Department of Transport, Tourism and Sport to local improvement schemes.

Shane Cassells (Meath West, Fianna Fail)
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I thank Mr. O'Leary for his response. Perhaps the local government officials will comment on how this change has impacted on the administration of the local improvement scheme.

Mr. John McCarthy:

I am not aware that it has impacted.

Shane Cassells (Meath West, Fianna Fail)
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It has not impacted.

Mr. John McCarthy:

I am not saying that it has not impacted. Rather, I am saying that I am not aware, and I generally would not be, if it has had any impact. Generally, when a function moves from one Department to another the whole package in that regard moves to the new Department and it is then open to the Minister of that Department to make a policy change. We would not be aware of changes to a scheme that we are no longer funding.

Shane Cassells (Meath West, Fianna Fail)
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This goes to the heart of the point I have been making throughout this meeting. My understanding is that councillors in Mayo were informed at a meeting on Monday of changes to how this scheme works.

Mr. John McCarthy:

I am sorry, but I cannot answer for the Department of Rural and Community Development.

Seán Fleming (Laois, Fianna Fail)
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We will take up the matter with that Department.

Shane Cassells (Meath West, Fianna Fail)
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I understand that following on from this change road projects cannot now proceed until they have been examined and sanctioned by that Department.

Mr. John McCarthy:

I am sorry, I cannot comment.

Seán Fleming (Laois, Fianna Fail)
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Was departmental sanction not always required under the local improvement scheme?

Mr. John McCarthy:

The Department of Housing, Planning and Local Government has not been responsible for the local improvement scheme for 20 years now.

Seán Fleming (Laois, Fianna Fail)
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I presume a list was always sent to the Department.

Mr. Dominic Mullaney:

Interestingly, in regard to LIS, it was essentially devolved. It is still devolved in so far as they can pick the schemes. Based on what the Deputy is saying, the Department wants to have sight of and examine the list.

Shane Cassells (Meath West, Fianna Fail)
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I am sure the witnesses will understand my frustration in terms of the control over local government. It is like a bold child that no one trusts to do its work, which is frustrating. Previously, engineering staff and councillors in a particular county could go about doing their own business but as things stand they now have to seek permission and sanction in this regard from the Department. Why, Chairman, when we have councillors elected by the people to do this work was this layer of bureaucracy introduced?

Seán Fleming (Laois, Fianna Fail)
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I do not know the answer to the Deputy's question but the committee secretariat will write to the Department directly on the issue highlighted by him. As I understand it, TII funds the local authorities for roads projects but the Department of Rural and Community Development is now getting involved in this area. Earlier, I listed nine Government agencies which are funding the local authorities. It now appears that there is an additional funding stream which we did not know about then. The list is getting longer and this leads to very disjointed public administration.

Shane Cassells (Meath West, Fianna Fail)
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Earlier, Deputy Cullinane engaged with Mr. McCarthy on the myriad of funding streams in existence in this area. We have now learned of another one which the Comptroller and Auditor General can add to his list for next year. This defies belief. The current process is very frustrating, in particular for the people who depend on us as politicians and the local authorities to deliver efficient services. Adding a further layer of bureaucracy does not help.

When listening to the proceedings earlier in my office I heard Deputy Deering pose very good questions about the disparity in funding, which supports my point that the system was broken before the changeover to local property tax, LPT. Its introduction exacerbated the problem. I understand Mr. John McCarthy's point that no county was left worse off but some are worse off owing to the inequitable system in terms of LPT calculation. I have discussed this issue with Deputy Deering. For example, Carlow did not have as many town councils and commissions as, say, Monaghan, which was also in receipt of general purpose grants and so on.

On the general purpose grants versus local property tax, which the Comptroller and Auditor General touched on earlier, what was the final outcome in that regard?

Mr. Seamus McCarthy:

My conclusion was that it effectively replaced the quantum that was available. In other words, after the water element was taken out of local authorities the level of funding was similar to what it had been previously.

Shane Cassells (Meath West, Fianna Fail)
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It was stated that the LPT replaced the general purpose grants. Why not have a local property tax alongside the general purpose grants system?

Mr. John McCarthy:

It was a policy decision related to the state of the national finances.

Shane Cassells (Meath West, Fianna Fail)
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Fancy flyers were distributed to all households stating that local property tax intake would fund X, Y and Z but as I have pointed out previously that has not been the case because LPT only replaced a stream of funding which previously existed in the form of general purpose grants. Those flyers were a precursor to the strategic communications unit. This irks me greatly.

Perhaps before they leave the witnesses from TII will outline where stands the outer orbital route that will impact Kildare, Meath and Louth.

Mr. Michael Nolan:

At the request of Department of Transport, Tourism and Sport, the National Roads Authority, NRA, carried out a feasibility report of this project, the report of which is currently with that Department. I do not believe any progress has been made since the report was presented to the Department. The project remains at feasibility route stage. I understand that the local authorities responsible for the outer orbital route area are maintaining a freeze on development at various road crossings so as to preserve the route.

Shane Cassells (Meath West, Fianna Fail)
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Perhaps the Department of Transport, Tourism and Sport officials would update us on the matter.

Mr. Ray O'Leary:

A number of road projects received early examination. I will ask my colleague, Mr. Mullaney, to comment further as he would be more familiar with the specifics. The outer orbital route mentioned was not one of the projects identified by Government for inclusion in the national development plan to go to pre-planning, planning and procurement and appraisal. In terms of status, this project is not progressing in terms of the priority list. The priority for the roads budget is to get us back to a level of where we are maintaining steady-state maintenance, with new projects coming on stream incrementally.

Mr. Dominic Mullaney:

Again, it is a project that may be looked at as part of the appraisal process but it is still at a very early stage. It reached a particular point previously and I suspect TII might look at it again but it would be a hugely expensive project. It is on par with some of the very big projects mentioned, including the M20, but it is not as far advanced in terms of design.

Shane Cassells (Meath West, Fianna Fail)
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On my earlier comments in regard to the general purpose grantvis-à-visthe local property tax, the point I was making is that we have moved from central governing funding to funding by the people via the local property tax.

David Cullinane (Waterford, Sinn Fein)
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I refer to the final sentence of one of the conclusions reached by the Comptroller and Auditor General on page 30 of his report.

It states: "A substantial part of the fall in funding levels has occurred as a result of the transfer of responsibilities from local authorities to other agencies and the reduction in capital expenditure by local authorities." There is an awful lot in that but it sums up many of our frustrations and issues.

I have one or two questions. With regard to our reporting on this — it will obviously form part of our periodic report — the Comptroller and Auditor General was examining the various funding streams and making the point that it can be very difficult to follow the money in terms of how local government is funded. We have certainly seen that today; that is for sure.

Second, we need to make sure we are getting value for money and that there is proper accountability and transparency. Part of the problem is that there is a transfer of responsibilities from local authorities to other agencies. One of those is Irish Water, which is the big one. Who is now responsible for Irish Water? Who is the Accounting Officer?

Mr. John McCarthy:

I am the Accounting Officer for the funding that goes to Irish Water and I am responsible for ensuring the necessary arrangements are in place to ensure value for money is achieved. Obviously, Irish Water itself is accountable to the joint Oireachtas committee in terms of its annual report and accounts.

Seán Fleming (Laois, Fianna Fail)
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Does Mr. John McCarthy have a role in regard to Irish Water?

Mr. John McCarthy:

No. This issue of a potential role for the Comptroller and Auditor General has arisen in the context of discussions at meetings of the joint Oireachtas committee. The Minister has indicated he is willing to explore that. There is a process being engaged in to consider this with a view to the Minister coming back to the committee on it as soon as possible.

David Cullinane (Waterford, Sinn Fein)
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That is great because amendments tabled by my party when the Water Services Bill was going through the Dáil were rejected. It is nice to see another lesson is being learned from the fiasco that is Irish Water. In any event, given that the Comptroller and Auditor General is the Accounting Officer for Irish Water, I must point out that there is a service level agreement with local authorities that ends in 2025. There is a plan to move the date back to 2021 and reduce the number of full-time equivalents by 1,000. Is that correct?

Mr. John McCarthy:

What the board of Ervia has said is that, as part of the process of delivering on the business plan for Irish Water which, in particular, aims to achieve operational efficiencies worth €1.1 billion, it would prefer to get to a point where the service level agreements are brought to a conclusion earlier than 2025. There is now a process of engagement with the local authorities, unions and Irish Water. The Minister has asked the parties to look at that and come back by Easter. I am basing this on memory. Equally, the Minister has made it clear this is a process through which agreement is to be reached rather than through which something is to be enforced.

David Cullinane (Waterford, Sinn Fein)
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I understand that, and there obviously has to be negotiation with the trade unions. My point is that the objective is to reduce the workforce by 1,000. That could be done through voluntary redundancies or redeployment. The objective, we are being told, is to save €70 million in taxpayers' money by reducing the workforce. How could we save money if there were a redeployment of staff?

Mr. John McCarthy:

When we talk about saving money in that context, we are referring to money in terms of the €1.1 billion in savings to be achieved in Irish Water's business plan. Local authorities are expanding their activities-----

David Cullinane (Waterford, Sinn Fein)
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I ask Mr. McCarthy to stop there for one second. We encountered this issue in respect of shared services also. We are being told that €70 million less will be spent on staff in Irish Water but if the staff who are to go are deployed elsewhere, there will be no saving to the taxpayer. Therefore, the wool is being pulled over people's eyes again as they are being told money is being saved. We are not saving money; we are moving staff around. There is a "Yes, Minister" effort whereby we are saying we are saving €70 million because there would be 1,000 fewer staff, but if the 1,000 staff were redeployed, we would still be paying for them. They would still be paid in the public service.

Mr. John McCarthy:

I will put it this way-----

David Cullinane (Waterford, Sinn Fein)
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Could Mr. McCarthy put it in a clearer way, if he can?

Mr. John McCarthy:

I will certainly do my best. If we were expanding local authority capacity in areas such as housing and did not achieve staff savings in one area we would have to fund the costs in an expanding area. The explanation is that one is, in effect, supporting the achievement of the other. Therefore, there is a net saving versus where we would have to be if we wanted to achieve what we wanted to achieve.

David Cullinane (Waterford, Sinn Fein)
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Who can give this committee a note on how exactly €70 million will be saved by the redeployment of staff from local authorities or Irish Water?

Mr. John McCarthy:

We can certainly get a note from Irish Water in regard to its business plan, the €1.1 billion in savings, what it is comprised of, and how it expects to achieve it. We can certainly provide a note on that.

David Cullinane (Waterford, Sinn Fein)
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A helpful suggestion came from one of the local authority CEOs to whom I spoke. In any local authority area, there is investment in addition to funding for local government that comes from a myriad of Departments. The Department of Education and Skills, for example, will spend money as part of capital and current expenditure but local authorities are not informed automatically of what funding goes in. They might hear about it in local newspapers or announcements. Why can a process not be put in place so the CEOs in the councils can be directly informed of funding that comes from other State agencies? It would make sense. They could then plan and they would know what is happening in their areas, which is not the case if they are not informed. Could this be examined to improve communications? Very often, one of the arguments we hear is that there is a silo mentality.

The second criticism is that small amounts of money, such as €10,000 for this and €20,000 for that, are made available on a piecemeal basis. All these small sums could be made available as part of a bigger package. There is a sense that there is a culture of breaking up the funding to make many small announcements because it is great for Ministers to be able to make such announcements. Is this an issue that could be examined in light of how grants are administered, and the piecemeal way that grant aid to local authorities is provided?

Mr. John McCarthy:

On the first point, we can certainly engage with Departments on the extent to which they are being made aware of investment - not to them but to their area. The Deputy mentioned the example of the Department of Education and Skills. In some cases, particularly Deputy Farrell's area, the local authority and the Department of Education and Skills have been very bound together, certainly in planning for schools. Therefore, there are some good arrangements working in some places. We can certainly consider that with other Departments.

With regard to grant schemes, I can speak only from our own point of view. I do not believe we have made any significant changes to the ways in which we have announced various housing schemes or grants, and there is certainly no intention to do a little bit of this and a little bit of that. We try to get the allocations out to local authorities.

David Cullinane (Waterford, Sinn Fein)
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One CEO, whose name I will not mention, was very frustrated that announcements are being made by Ministers on housing developments at stage 1, when there is not even any planning permission. It is more about announcements than anything else. It is obviously frustrating. We had a discussion earlier on the communications unit set up by the Government and the blurring of lines between the Civil Service and politics. There is always a need to separate the two. If there are CEOs who are expressing the concern I have mentioned, albeit privately, it is an issue for them. It is not just an issue for them, but they see it as a problem. I am relaying this to Mr. McCarthy and asking him to examine it. I refer not only to that but also to the piecemeal way in which small grants are made available, especially for rural development schemes. A little money is made available here and there. It is great for a Minister or local Deputy to be able to announce such a grant. We can all be guilty of it. There is a culture in Irish politics that we should reconsider in terms of how we fund local authorities and how we provide them with grant aid.

Mr. John McCarthy:

I have just two points on that. I am quite surprised that a local authority chief executive would have a sense of disappointment, or however the Deputy characterised it, over the announcement of stage 1 of a housing scheme. That is the first formal subscription by the Department to a budget for a project. That is very important. It is what gets it moving through the system.

Could the Deputy remind me about the second issue he raised? I wrote it down but cannot read my own handwriting.

David Cullinane (Waterford, Sinn Fein)
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I was making the point about the grant aid but Mr. McCarthy has answered it already.

Seán Fleming (Laois, Fianna Fail)
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To conclude the section, I shall ask a few questions as Chairman that were not asked to date, primarily on the transport area.

Deputy Cassells mentioned that people who pay their motor vehicle tax give out if the roads in their areas are not being maintained. This link has always been there in the public mind, especially in rural areas. People who pay their motor tax expect some payback for it in terms of the roads. I want to read a paragraph from Mr. John McCarthy's opening statement in which he indicated:

As the committee is aware, from January 2018, responsibility for motor tax transferred to the Department of Transport, Tourism and Sport, with consequential implications for the local government fund. In particular, motor tax proceeds are now paid directly into the Exchequer rather than into the fund ...

The link people believe is there was firmly broken and discontinued as of 1 January. Since that date, motor tax goes straight into general Exchequer funding. I want to put this on the public record. It is no secret, but it will be a shock to most people because they have always felt that there is a link between their motor tax and the maintenance of roads. Since 1 January last, however, it is part of general taxation and it goes directly to the Exchequer. I know people will say that money can come back in the other direction to make up for it, but the direct link people perceived existed has been broken. That will come as a bit of a surprise but I wanted to say it.

I want to make a few points on the Department of Transport, Tourism and Sport. It pays special grants to local authorities for local roads. I do not want the witnesses to go into too much detail. There is a mechanism for national, primary and secondary routes, but where is funding obtained for a regional road to be improved? If a town wants an inner relief road that is not part of the national plan how does it work through the system? Is it based on submissions from each local authority? What type of ranking system does the Department have nationally? I would like a brief word on this. Do not spend too much time on it because time is running out.

Mr. Ray O'Leary:

In the first instance, it is a matter for a local authority to prioritise what projects it has identified that it wants to progress in its area. I must say again I wish we were in a position to fund many more projects than we will be for a while. Essentially, the local authorities will prioritise and we will engage with them. We try to prioritise by having consideration for two or three key issues. One is projects that may be associated with industrial or other investment, perhaps releasing land for employment development. We also look at projects that might be involved in releasing land for wider development. Other projects might have the potential to enhance significantly the amenity of particular urban areas. A number of serious issues will feed into the consideration, and we will also go through a formal appraisal process. Perhaps Mr. Mullaney wants to add something to this.

Mr. Dominic Mullaney:

There are two types, namely, specific and strategic. Specific is up to €5 million and strategic is €5 million or more. We are reviewing the documentation at present. As a result of all of the changes in the requirements and the public spending code, we are updating the documentation so that in the next few months if a local authority wishes to apply and prioritise, it will have access to a standard form of documentation which will set out exactly what the process involves. At present, because of the cutbacks, things are being dealt with on a case by case basis, and a certain number have got into the capital plan. We plan to put it on a more structured basis. The only caveat I would say is the amount of money we have available for that programme will be limited as we still have to bring up the steady state moneys.

Seán Fleming (Laois, Fianna Fail)
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Does the Department have engineering staff to look at this or do the people in TII do that on its behalf?

Mr. Dominic Mullaney:

We look at it for regional and local roads.

Seán Fleming (Laois, Fianna Fail)
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Does the Department have its own engineering staff to go out?

Mr. Dominic Mullaney:

We do, yes.

Seán Fleming (Laois, Fianna Fail)
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My next question is for TII and perhaps the best way to deal with it is to send a note. I know it has centralised maintenance on the major motorway networks. TII states in the briefing notes that there are nine local authorities between Dublin and Cork on the M7 and M8, whereas TII has centralised this into three maintenance contracts outside of the public private partnerships. How does it ensure consistent standards in its level of maintenance? I am speaking about winter on the roads and dealing with snow and adverse weather conditions so there is consistency between the roads covered by TII and roads covered under the public private partnerships. The public does not know when it moves from one to another. How does TII maintain absolute consistency so that drivers do not get a sudden shock?

Mr. Pat Maher:

Between the three motorway maintenance contracts, the three regional contracts plus the ten public private partnerships, there is a set of contract requirements. There is a very clear specification in terms of performance. We provide all of the information to these through the ICENET weather information system. This information is available in terms of decision making. Operators are required to collaborate and consult with adjoining operators to ensure there is consistency and we do not have a situation, for example, where one operator goes out and treats and another operator goes out two hours later but there is a gap between what they do. This is a fairly basic principle. This level of co-ordination also exists between adjoining and abutting local authorities and motorway networks. There is a fairly well honed system in terms of ensuring a consistency of approach between all of the different operators.

Seán Fleming (Laois, Fianna Fail)
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TII might send us a detailed note, especially on how many different contracts are involved in the motorway network. Some of us use the motorways and there has been a marked improvement in recent years regarding maintenance. I am speaking about hedge-cutting, litter, barrier protection, lights and paving. TII probably has a bigger budget than the local authorities had when they were doing it. The quality has improved.

We have not touched on the special report on motor tax of the Comptroller and Auditor General. I have a couple of quick questions. We have all studied it. It is from December 2016 so it is 15 months old. We were getting to it last year and it has moved between Departments. I have a couple of quick questions, and if the witnesses from the Department of Transport, Tourism and Sport do not have the answers they can come back in writing to us. Well over 50% of people were paying motor tax online when the report was written in 2016. Do the witnesses have any idea of the current figure?

Mr. Tim Scully:

At the moment it is 74%.

Seán Fleming (Laois, Fianna Fail)
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That is a big increase. Last year, 74% of people taxed their cars at home at their kitchen table or on their iPad as the case may be, so three quarters of people are doing this. One would expect the Department to have staff savings at front-line cash desks in various local authorities if only one quarter of people go in to do it over the counter. That is fine. Perhaps the Department will send us an up to date chart because I am sure it has one.

The witnesses will probably not have an answer to my second question, but I really want to get one. It is very clear from the report of the Comptroller and Auditor General that the tax on older cars, which is based on engine size, is much heavier. What year did the change based on emissions come into effect?

Mr. Tim Scully:

In 2008.

Seán Fleming (Laois, Fianna Fail)
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The witnesses possibly know off the top of their heads, but I will not stretch it too much, so will they send us the details of the number of vehicles on the road that are pre-2008 and post-2008?

Mr. Tim Scully:

I probably have it to hand.

Seán Fleming (Laois, Fianna Fail)
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Mr. Scully expected to be asked this. Clearly, pre-2008 cars have a bigger engine size and the motor tax is two, three, or four times the amount for newer vehicles, which is based on emissions. It is clear most of the people taxing post-2008 vehicles do it in one fell swoop because it is only a couple of hundred euro per annum, whereas most of the people with bigger, older cars do it on a quarterly basis because it is so expensive. Many people tell me they have old cars and they cannot afford to change them. They call it a poverty tax. They cannot afford new cars and they must pay very high motor tax on their old vehicles. Do the witnesses get the point? It is almost a poverty tax. Those who can afford to get a new car get a reduced car tax because it is based on emissions. I ask the witnesses for an observation on this.

Mr. Tim Scully:

I have the figures to hand. At the end of January, there were 865,000 under the old system-----

Seán Fleming (Laois, Fianna Fail)
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Pre-2008.

Mr. Tim Scully:

Yes, and there were 1.22 million post-2008 vehicles.

Seán Fleming (Laois, Fianna Fail)
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So it is 60% versus 40% or thereabouts. The Department is probably collecting way more from the 40% than from the 60%. Of course it is. I am sure Mr. Scully has those figures also.

I have them here somewhere.

Seán Fleming (Laois, Fianna Fail)
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Our guests can understand where we are coming from. This is often raised with us. People who drive old cars do not have the wherewithal to replace them.

Mr. Ray O'Leary:

The difficulty is that the cost of administration does not reflect the length of time for which the tax is paid. The administration costs are the same if the tax is paid it for three months or 12 months.

Seán Fleming (Laois, Fianna Fail)
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I will come to the cost of the administration in a moment. I want to address the revenue side of this issue.

Mr. Tim Scully:

The committee should bear in mind that these are private, as opposed to commercial, vehicles.

Seán Fleming (Laois, Fianna Fail)
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This relates to cars.

Mr. Tim Scully:

The figure is €519 million. We may round it up to €520 million, versus €333 million.

Seán Fleming (Laois, Fianna Fail)
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Obviously, the drivers of the 1.22 million post-2008 cars are paying €333 million euro in tax, while the drivers of the 865,000 older cars are paying €520 million in motor tax.

Mr. Seamus McCarthy:

That is roughly what we projected.

Seán Fleming (Laois, Fianna Fail)
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We know where that is heading. We have almost completed our consideration of this. There is a point we would be very remiss not to address. The witness has given us those answers directly and in an upfront fashion, which is great. It will save him the bother of coming back to us. When the report was compiled, the percentage of taxpayers who paid online was 67%. It is now 74% and is moving inexorably upwards.

The next question concerns the cost of processing these payments. We know that there is a penalty of 10% or 13% for paying taxes for a six-month or three-month period. Again, that is a poverty tax. It is a charge on people who cannot afford to pay for an entire year at once. They must pay an extra fee. It has been more than a year since this report. Can the witness give us an estimate of the cost of processing motor vehicle tax online versus the cost of doing it over the counter? I refer to the cost of a single transaction. Whether it is a quarterly or annual payment is neither here nor there. It obviously costs significantly less to do it online.

Mr. Ray O'Leary:

It was estimated as part of the Comptroller and Auditor General's report. He commented that it can be challenging to pin down all the costs to local authorities. It was estimated to be roughly €10 per transaction in the motor tax offices and about €5 per transaction when paid via motor tax online. That supports the IT infrastructure, which is critical to the working of the local authority motor tax offices.

Seán Fleming (Laois, Fianna Fail)
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How much extra does it cost a motorist to pay his or her taxes by the quarter? Let us consider the older and bigger cars. If there is a €10 processing cost per transaction, it probably costs more to pay taxes three or four times a year than it does to settle them once a year. We are informed that 75% of people are paying online and that the cost of the transaction is €5. Can the witness provide an average figure for the extra expense involved in quarterly payments where one of those old cars is concerned? I am asking for a ballpark figure. I will not hold the witness to this.

Mr. Tim Scully:

The cost of a quarterly payment is averaged at 28.25%.

Seán Fleming (Laois, Fianna Fail)
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What is that as a sum of money?

Mr. Tim Scully:

That is a proportion of whatever the annual charge is. If the annual charge is €100 euro, the figure would be €28.50

Seán Fleming (Laois, Fianna Fail)
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No pre-2008 car is taxed at €100. An amount of €1,000 would be closer to the mark.

Mr. Tim Scully:

The figure is 28% of whatever the cost is. If the annual cost is €1,000 euro, the quarterly payment is €280.

Seán Fleming (Laois, Fianna Fail)
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Not only do we levy a poverty tax from people who cannot afford to change their cars, we are now ripping off the poor. The witness is saying that if he or she is liable to pay €1,000 in tax on an old car, a motorist is charged approximately €280 extra to pay by the quarter. If he or she pays online, the cost per transaction is €5. As such, the actual cost to the Department of processing four quarterly payments is €20 but it charges people up to €280 to pay in that way.

Mr. Tim Scully:

I wish to clarify. A quarterly payment represents 28% of the annual cost. However, it would be 25% of the annual cost in any event, that is, a quarter of a year's payment. The margin for paying quarterly instead of annually is only 3%, not 28%. If tax is levied for a quarter, that equates to 25% of a yearly liability of €1,000, or €250. The actual cost of a quarterly payment is 28.25%. The extra expense is a margin of 3.25%, not 28%.

Seán Fleming (Laois, Fianna Fail)
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I ask the witness to go through that again.

Mr. Tim Scully:

If a motorist's tax is €1,000 per annum and he or she pays it by quarter, a quarterly payment would be €1,000 divided by four. That is €250. We charge €280. Instead of charging 25% for a quarter, we are charging 28%.

Seán Fleming (Laois, Fianna Fail)
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How much extra is the Department charging on €250 per quarter?

Mr. Tim Scully:

A sum of €35.

Seán Fleming (Laois, Fianna Fail)
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Mr. Scully has just told me that it only costs €5 to process the transaction online, but the Department is charging €35. This is the point at which I am getting. If a person whose tax is €1,000 can pay in one instalment, it is €1,000. If he or she has to pay it four times per annum-----

Mr. Seamus McCarthy:

That amounts to an extra €120.

Seán Fleming (Laois, Fianna Fail)
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-----he or she pays an extra €120 because he or she cannot afford to do it upfront and cannot afford a new car. Mr. Scully has just told me that 75% of people pay online, for which the administrative cost per transaction is €5. If a person pays online four times a year, the cost to the Department in administrative terms is €20. However, people are being charged €120. It is a rip-off of the poor. I am not blaming Mr. Scully, but this system will change. That is a gross rip-off of people with old cars, the tax for which is very expensive. The cost of processing the transaction is minimal, and the Department charges a person who cannot afford to make a single annual payment, and so pays by the quarter, €120 in processing fees. The actual cost to the Department when a person makes four online transactions in four quarters is €20. That is a rip-off. That is the last word. I will finish on that. I hope those present follow what I am saying. This jumped out to me when I read the report a year ago.

Seán Fleming (Laois, Fianna Fail)
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I ask the witnesses to provide a table.

Seán Fleming (Laois, Fianna Fail)
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Some 865,000 of those are old.

Seán Fleming (Laois, Fianna Fail)
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They are pre-2008 cars.

Seán Fleming (Laois, Fianna Fail)
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I will ask our guests to prepare that note. I am absolutely confident that all the information is available in the Department. I tabled parliamentary questions on this matter last year when I saw the report last year. I sought information on the age of cars and the Department had it. I ask that our guests provide an update to the committee as opposed to me, Deputy Sean Fleming. The Department knows the age of cars on the road. I also ask for a table of the taxes levied on cars with different engine capacities, from models of 1,000 cc up to old bangers with 3,000 cc.

Mr. Tim Scully:

Would the committee like the information on engine capacity organised by year?

Seán Fleming (Laois, Fianna Fail)
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No, that would phenomenally complicated. I request the age profile of the cars on the road on one sheet of paper. On a separate sheet of paper, I would like a chart showing what it costs a person to tax the old cars that were 1,000 cc, 1,100 cc and so on, on a single transaction basis, a six-monthly basis or four transactions per year. This should also list the extra costs motorists have to pay on top of their motor tax for the year. It is now on record that the cost of processing these payments online is approximately €5 per transaction. We will help the Department to be fair to motorists. That is one of the advantages of coming before the Committee for Public Accounts. This unfairness stood out when I saw the report, quite apart from the financial issue.

I was waiting until we got to the end of the meeting because we did not have time to discuss it. I think everyone understands where we are.

At this stage we will bring this substantial section of the meeting to a conclusion. I thank witnesses from the Department of Transport, Tourism and Sport and Transport Infrastructure Ireland witnesses for being. They are free to leave. For the record, we are not formally noting the accounts for anyone at the moment, but that is not an issue because we will be producing an interim report and will note all of them in a block some day down the road. We have a procedure for doing so.