John Gormley (Dublin South East, Green Party)

In February, my Department set out details of the financial requirements for local authorities relating to the overall management of their capital and current accounts. These requirements flow directly from the requirements for Government finances as a whole to be managed in accordance with the Stability and Growth Pact established under the Maastricht treaty and the associated limitation on budget deficits. In this regard, the Government set a limit of €200 million for the contribution that the local government sector can make to the deterioration in the general government balance in any one year. This is not a new requirement for 2009, but the downturn in the economy and the substantial pressure on funding require a sharp focus in all sectors, including local authorities, on tight control and management of public finances.

To stay within the overall limit for the general government balance, it is necessary for local authorities to manage their finances so as to keep their current and capital accounts in balance for 2009. Within this broad requirement, there is provision for borrowing by local authorities for capital infrastructure. In aggregate and allowing for repayment of €50 million in existing loan principal, loan sanctions amounting to €250 million are being allocated for capital projects on a prioritised basis this year. I appreciate that these requirements impose a particular degree of financial discipline on local authorities. However, it is essential that all levels of government contribute to the necessary action to restore order and stability to the public finances.

These requirements do not conflict with the continuing emphasis on capital investment in necessary infrastructure critical to economic recovery and sustaining the economy at local level. The Government and local authorities will continue to progress capital investment projects that can maximise economic, social and environmental returns. Accordingly, the prioritisation of investment opportunities and the targeting of available resources to labour intensive activity and the support of economic recovery will continue to be the key focus of capital expenditure in the local government sector.

The overall level of resources applied by local authorities remains significant and, taking account of Exchequer and local sources of finance, it is expected that total capital investment by these authorities, notably in housing and infrastructure as well as other community supports, will exceed €6 billion in 2009.

My Department will continue to work closely with local authorities to ensure that, within the overall financial limits to be met, decisions on these matters will be taken in a way that gives the necessary prioritisation to environmental, economic and social infrastructure as part of the overall contribution to economic recovery.

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