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.