Mr. John McCarthy:

I am pleased to be here this morning as Accounting Officer to assist the committee in its examination of Vote 34; Chapter 4 of the Comptroller and Auditor General’s report for that year on central Government funding of local authorities; and the Local Government Fund account for 2017. I am joined by a number of colleagues from the Department, who have been introduced. I am pleased to have been able to facilitate the committee’s request to have attendance on this occasion from the local government sector of our two colleagues from the CCMA, who have also been introduced. As requested, I have provided some advance briefing material for the meeting and I will, therefore, keep these comments short.

At the outset, I should note that, in 2017, a transfer of functions took place with the movement of a number of community-related programmes to the new Department of Rural and Community Development. A further Revised Estimate for the year made the necessary technical changes to the Estimate to reflect the transfer and also provided funding in the Vote of almost €293 million for Irish Water, arising from the Water Services Act 2017, to take account of the revenue shortfall due to the abolition of domestic water charges and the cost of related refunds. In addition, in the course of 2017, a Supplementary Estimate of €100 million was approved to meet costs arising under the local authority housing capital programmes.

The Department’s gross expenditure in 2017, as set out in the appropriation account before the committee today, totalled some €2.087 billion. In accordance with Government accounting practice, this expenditure figure reflects the position after the transfer of functions had been completed and these additional funding provisions had been made.

The Department had significant achievements in 2017 in delivering on key policies and programmes and I will comment briefly on a number of these. As the committee is aware, implementation of the Government’s six-year Rebuilding Ireland action plan is the core focus of our daily work in the Department and, indeed, across central and local government, as we strive to make meaningful, tangible and sustainable progress towards a better housing landscape. At its meeting on 25 October last, the committee examined in some detail housing supply issues arising in the context of Vote 34 for 2017. The Department’s gross voted expenditure on housing programmes, as set out in the appropriation account, totalled some €1.3 billion in 2017, including the additional €100 million provided by way of Supplementary Estimate that I referred to earlier. A further €98 million was also available from local property tax, LPT, receipts to fund housing programmes of certain local authorities whose LPT allocation exceeded their LPT funding baseline, bringing the overall total resourcing for the Department’s housing programmes to over €1.4 billion in 2017.

As regards 2018, gross voted expenditure on housing programmes totalled some €1.97 billion. An additional €92 million was also available from LPT receipts, bringing the overall total resourcing for the Department’s housing programmes to over €2 billion last year.

Table 1, which I have circulated in the briefing paper for the committee today, sets out the key Rebuilding Ireland targets for the period 2016 to 2021 and details the progress that has been made to the end of 2018. At the October meeting, I shared with the committee information on progress achieved in 2017. During 2018, significant further progress was made to deliver on the commitments in Rebuilding Ireland. In overall terms, housing supports were delivered to over 27,000 households in 2018 through the range of social housing measures in Rebuilding Ireland, significantly ahead of the target of just under 25,500.

Roughly one in four new homes built last year was a social housing home. The new-build figure was 85% up on 2017 and eight times higher than 2015, the year before Rebuilding Ireland began. Wider housing supply also continued to grow in 2018 with the number of new homes becoming available for use in the full year reaching 21,458, an 18% increase on the corresponding figure of 18,209 for 2017. Significant progress was also made in 2018 in advancing many social housing projects through the range of delivery mechanisms and programmes.

By the end of the year, a substantial construction programme of over 19,000 units was in place to deliver further increases in the number of new social housing homes being built in the coming years.

While the numbers of homeless households supported into more sustainable housing continued to increase significantly last year, regrettably, this did not match the numbers of new households presenting to homeless services. This area of our activity, working with housing authorities and NGOs, will continue to be the focus of priority and sustained attention in 2019.

The 2019 Estimates provision for housing amounts to nearly €2.4 billion, including local property tax, LPT, receipts, the bulk of which will be devoted to the achievement of the overall 2019 target of supporting almost 27,400 households across all our social housing delivery streams. While much has been achieved in the first half of Rebuilding Ireland in addressing the issues in our housing sector, there is much work that remains to be done. There are demanding targets to be achieved in the years ahead and these will continue to be the focus of the absolute highest priority by the Department.

As the committee is aware, responsibility for the provision of public water services transferred from local authorities to Irish Water on 1 January 2014. Detailed information regarding Irish Water's progress in delivering water services is set out in its annual report for 2017.

The Government decided in September 2017 that, in line with the recommendations of the Oireachtas Joint Committee on the Future Funding of Domestic Water Services, all State funding for domestic water services should in future be provided through the Department’s Vote. These new funding arrangements came fully into effect in 2018. As regards 2017, over €930 million in funding was provided to Irish Water from the Department, made up of almost €639 million from the Local Government Fund, LGF, and almost €292 million from the Vote. The latter amount comprised €114 million to take account of the revenue shortfall due to the abolition of domestic water charges and almost €178 million for related refunds to customers and necessary administrative costs.

The second year of operating under the new multi-annual capital funding framework for the rural water programme was 2017. The new structure provides greater funding certainty for priority investment needs and supports proper planning and sustainable development in rural areas. The Department recouped just over €15.3 million to local authorities during the year for capital expenditure across the six measures of the programme.

The chapter of the Comptroller and Auditor General’s annual report concerning central Government funding of local authorities, which we will discuss later today, 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 2017 totalled some €2.66 billion, an increase of nearly 20% on 2016. The Local Government Fund accounted for 36% 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 account for 2017 gives details of the operation of the fund during the year. The income sources to the fund in 2017 totalled €1.86 billion, made up of motor tax of just over €1 billion, local property tax receipts of €477 million and a payment of €365 million from the Exchequer, through Vote 34. The main payments from the LGF in 2017 were LPT funding to local authorities of just over €500,000; a payment of €639 million as subvention to Irish Water, which I mentioned earlier; a payment of €333 million to the Department of Transport, Tourism and Sport for works on non-national roads and for public transport infrastructure; and a payment to the Exchequer of €230 million.

As the Comptroller and Auditor General mentioned earlier, in 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 the Department’s Vote. Funding for roads and public transport infrastructure, formerly routed through the fund, is now channelled through the Vote of the Department of Transport, Tourism and Sport and a payment to the Exchequer from the LGF is no longer required. Further details of these changes are in the briefing paper circulated for the meeting. When taken together, the changes result in much greater transparency in terms of the various flows of funds involved.

In terms of accountability, 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 his or her 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 respect of the authority and will assess any actions taken within that authority in response to either a statement or report, and will report on its findings.

Scrutiny arrangements for local government were also enhanced in recent years with the establishment of the National Oversight and Audit Commission, NOAC. NOAC scrutinises local government performance and supports the development of best practice and enhanced efficiency in the performance of local government functions. The Comptroller and Auditor General notes in his chapter the increase in oversight of local authority spending since 2014 brought about through the operation of the commission.

Further areas of expenditure set out in the 2017 Appropriation Account include, in the planning area, meeting the costs of An Bord Pleanála, which amounted to some €17 million, as well as Met Éireann costs of €18 million.

The matters I have referred to illustrate well the broad range of programmes and activities for which the Department had responsibility in 2017. I and my colleagues will be happy to respond to questions or issues that emerge in the course of the committee’s further work today.