Pat Gallagher (Donegal South West, Fianna Fail)

I move: "That the Bill be now read a Second Time."

The primary purpose of the Bill is to give legislative form to the increases in motor tax rates and trade plate licences which were contained in the financial resolution on motor tax passed by the Dáil on 25 November 2003. The resolution and the Bill provide for a standard 5% across the board increase on motor tax on all classes of vehicle. As the House will be aware, the increases in motor tax are already in place and apply to all motor tax taken out for periods from 1 January this year. In making the decision to increase motor tax rates, the primary consideration was the need to provide adequate funding for the non-national roads programme.

Motor tax is paid directly into the local government fund. The receipts from motor tax are topped up annually by an Exchequer contribution which is increased each year at least in line with inflation by reference to the base year of 1998. In fact, the Exchequer contribution to the fund since its introduction has far exceeded the minimum inflation guarantee in the Local Government Act 1998. The fund is used to finance the general purpose needs of local authorities and to finance non-national roads grants.

The general purpose grants, which are paid from the fund, are discretionary block grants which can be used by authorities for whatever purpose they consider necessary. In general, they are used to supplement other current income sources such as specific State grants, commercial rates and fees and charges for services. The income from all these sources is incorporated into local authorities' annual budgets to fund a wide range of functions, ranging from management of the planning system, upkeep of social housing, operation and maintenance of public water and sewerage systems, waste management, care of the natural environment, running the fire services, etc.

Under the new arrangements introduced by the local government fund, the level of general purpose funding available to local authorities has increased substantially. The extent to which this is so is evidenced by the fact that, since 1997 when the current parties in Government first came to office, the level of general purpose grant aid to local authorities has increased on average by 122%. This represents an average annual increase of some 17% over the past seven years. The 2004 funding package of €752 million is up €92.2 million on last year. In anybody's language, this represents a valuable contribution to local government.

While it is relevant to make reference to general purpose grants in any discussion on the local government fund, the Bill is essentially concerned with non-national roads. I am aware from previous debates in the House that there is wide agreement regarding the need to invest in our non-national road network to develop the social and economic potential of all regions. The establishment of the local government fund and its substantial funding by motor tax receipts has created an important link between the amount of tax paid by motorists and the visible service they receive for that tax in terms of better roads. It is estimated that the motor tax increases will generate an additional €34 million for the local government fund in 2004. I assure the House that every cent of the extra revenue generated by the increases in rates will be spent on non-national roads. The LGF increase of €34 million in 2004 represents an increase of almost 9% on the 2003 allocation of €394 million.

The grant allocation for non-national roads in 2004 is €477 million. This is the highest in the history of the State. This allocation is more than double the 1997 expenditure and almost 10% more than last year. I am happy to record that the Government has, for a third consecutive year, maintained the allocations at a record level.

This €477 million comprises €428 million from the local government fund and €48.8 million from the Exchequer. The 2004 Exchequer allocation shows an increase of around €8.8 million, or 22%, over the 2003 initial provision. This funding is mainly for key strategic non-national roads projects that will assist housing, commercial and industrial development. The additional funds being provided in 2004 by the Exchequer will enable local authorities to progress work on critically important schemes on the country's regional roads network.

The national development plan sets out the Government's expenditure plans for the non-national road network between 2000 and 2006. The plan commits €2.43 billion to the non-national roads programme over the period. Under the plan, €1.08 billion will be spent in the BMW region and €1.35 billion will be spent in the southern and eastern region. Expenditure in both regions between 1 January 2000 and 31 December 2003 was well ahead of that profiled for the period in the plan. Expenditure in that period was almost €1.62 billion compared with a profile of €1.41 billion. This represents an increase of almost 15%. Expenditure in the BMW region was almost €690 million compared with a profile of €622 million and expenditure in the southern and eastern region was almost €930 million compared with a profile of €787 million.

The non-national roads programme is one of the national development plan's major success stories. It continues to be one of the best performing measures under the southern and eastern and BMW regional operational programmes. The success is largely due to the good work of local authorities. This excellent progress has been recognised in the mid-term reviews of the regional operational programmes and in the ESRI's mid-term evaluation of the national development plan.

The restoration programme continues to be a key part of non-national road grant allocations. Just over €220 million has been allocated for the restoration programme in 2004. This funding will enable local authorities to carry out all schemes included until the end of 2004 from their multi-annual programmes from 2002 to 2005.

The first pavement condition study of non-national roads, which was carried out in 1996, identified that approximately 47,000 km. of the non-national road network were deficient at that time. The success of the Government's policy in this area can be gauged by the fact that it is estimated that approximately 32,000 km., or 68% of the network deemed as deficient in 1996, had been restored to good condition by the end of 2003.

A company of consulting engineers, RPS-MCOS Limited, was appointed last year to conduct a second pavement condition study of regional and local roads, as well as a review of pavement management systems. This new study is part of the Government's ongoing commitment to restoring the regional and local roads network to a satisfactory condition. The results of the study will determine the progress that has been made since 1996 and the extent of the remaining deficiencies in the non-national road network. The results will form an important part in prioritising investment in the non-national network and ensuring value for money in future years. Following the completion of the study, local authorities will be asked to submit revised multi-annual restoration programmes from 2005 onwards.

Pavement management systems have not previously been reviewed. The consultants have been asked to review existing systems and to recommend a single system for use by local authorities on the non-national road network. This is intended to assist local authorities in prioritising schemes for inclusion in the restoration programme. Work on the study and review is due to be completed by August of this year.

I wish to send a strong message to local authorities by stating that the Government's commitment to the non-national roads programme must be matched at local level. It is estimated that local authorities will invest approximately €150 million of their resources on non-national roads in 2004. This investment will bring the total investment this year to €627 million. The House is aware that State grants are intended to supplement the contribution of resources by local authorities, rather than being seen as a substitute for such resources. I expect local authorities to maintain their contribution of resources to non-national roads and to aim for increases at least in line with inflation. My Department will monitor closely this element of the programme this year. It is intended that local authorities which increase expenditure of their own resources will be rewarded.

I am sure the House will agree that huge strides have been made in developing our non-national road infrastructure in recent years. This development has been due, in large part, to the establishment of the local government fund and the assignment of motor tax to that fund. It is obvious that the increases in motor tax rates provided for in this Bill will not be popular, but they will ensure that the progress which has been achieved can be built on in future years. I mentioned that the rates of motor tax set out in the Bill apply to tax discs and trade licences taken out for a period beginning on or after 1 January 2004. The new tax rates for all vehicles are set out in the Schedule to the Bill.

I would like to inform the House what the increase of 5% on all vehicles means, in cash terms, in respect of private cars and goods vehicles, which make up over 90% of the national fleet. The annual rate increase is €7 for the smallest private cars, those under 1,000 cc. The annual increase is between €11 and €13 for private cars of between 1,001 cc. and 1,300 cc. The annual increase is between €14 for private cars between 1,301 cc. and 1,400 cc. Some 60% of the national car fleet is made up of cars under 1,400 cc., therefore, the annual extra cost for most motorists will be between €7 and €14, or between 13 and 27 cent per week. The increases for the remaining cars will range from €15 for cars over 1,400 cc. to €64 for cars over 3,001 cc. Fewer than 0.5% of cars are in the 3,001 cc. plus category.

The effect of the 5% increase on goods vehicles will vary, depending on the size of the vehicle. Some 85% of vehicles in this category are at the lowest level of charge, meaning that they will pay an annual increase of €12, or 23 cent per week. A 5% increase is proposed for trade licences, or trade plates as they are known. These are the green registration plates used by motor traders on vehicles which are temporarily in their possession, in lieu of paying tax on such vehicles. While there are strict restrictions on the use of the plates, they are transferable between vehicles. The increase for a pair of trade plates will be €13.

The purpose of this short Bill, which has just six sections, is to give permanent legal standing to the increases in motor tax introduced by a financial resolution passed by the Dáil in November 2003. The increases are being introduced for the sole purpose of funding the national roads programme, to ensure that local authorities can continue the great progress they have made in recent years in rehabilitating our non-national road network. I commend the Bill to the House.

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