John O'Donoghue (Kerry South, Fianna Fail)

I thank Deputy Catherine Murphy for raising this matter. I make this reply on behalf of the Minister for the Environment, Heritage and Local Government, Deputy Roche, who apologises for being unable to attend the debate.

The Minister acknowledges that the level of general purpose grants from the local government fund is of great concern to all local authorities, and the Government's record in this regard is worth noting. The total allocated to local authorities in 2005 through general purpose grants amounts to €817 million. This is an impressive figure in itself and represents an increase of 8.6% over the corresponding figure for 2004, which was 14% above the amount provided in the previous year. Since the Government came to office in 1997, general purpose funding has increased by about 140%, which is many times the rate of inflation over the period. That means central Government has contributed in a real and substantial way to local authorities.

General purpose allocations over recent years have been made up primarily of two elements, an across-the-board percentage increase on the previous year's allocation and an amount allocated through the needs and resources model. For 2005, across-the-board increases of 7% were allocated to each authority, amounting in total to more than €56.6 million for all authorities. A sum of €12 million was allocated using the model.

Across-the-board increases provide all local authorities with a basic level of increase over the previous year. Such increases are given in recognition of inflation and the fact that all authorities face many challenges of a similar nature, such as pay increases, each year. For many years following the introduction of the rate support grant in 1998, local authorities complained that the funding distribution system did not have regard to the differing circumstances of each authority. To address this issue the needs and resources model was developed in 2000. It calculates allocations on the basis of the expenditure needs of each authority and the income available from local sources, such as commercial rates, charges for services and miscellaneous fees. At the same time, the model is designed to ensure each authority receives a baseline allocation and does not receive less than in the previous year.

The calculation of the expenditure needs and local income for each local authority is based on a comprehensive annual return that each local authority provides. This return gives details of actual expenditure and income for each service provided in the latest year for which such data are available. It also provides statistics on each authority's operation such as the number of planning applications, housing applications, housing loans administered, laboratory tests carried out and so on. In addition, details are provided on the extent of the infrastructure local authorities must maintain, including local roads, local authority dwellings and water treatment plants. On the basis of that comprehensive data and appropriate unit target costs and income, the model identifies a funding gap for each authority, which is, in effect, the difference between appropriate expenditure and income. The overall amount available for allocation through the model is distributed primarily in proportion to each authority's funding gap while ensuring that each authority receives its baseline allocation.

The rules used in assessing appropriate expenditure and income are reviewed regularly to ensure that the model reflects genuine conditions at local authority level. Local authorities are involved in that review process as much as possible. They can also make proposals on changes to the model at any stage. Every year, after the allocations have been made, each local authority is sent a detailed return from the Department indicating how the expenditure and income information supplied by the authority compares with the target costs in the model.

It is safer to use actual financial data provided by local authorities in assessing funding requirements rather than relying on general projections of growth that may prove unreliable. To use Estimates as opposed to outturns would inevitably lead to a need to reduce retrospectively or claw back funding from local authorities. That could result in deficits and would not be conducive to effective management. The Minister for the Environment, Heritage and Local Government, Deputy Roche, has no proposals to change that process. It was endorsed in 2002 by an independent consultancy review commissioned to evaluate the model, which concluded that the use of outturns rather than Estimates is more likely to identity the true spending needs of each authority and provides for a more equitable distribution of the local government fund.

Today's abridged Estimates volume provides welcome news for the local government fund, and the Minister, Deputy Roche, hopes to inform local authorities of their general purposes grants for 2006 in the near future.

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