Michael Finneran (Roscommon-South Leitrim, Fianna Fail)

I welcome the opportunity to address the House this evening. I wish to look specifically at the issues relating to the Department of the Environment, Heritage and Local Government and to touch on some other key points for the Irish economy. I thank my colleague, the Minister of State for Enterprise, Trade and Employment, for allowing me to share time with him on this important issue.

Local authority costs arise from their statutory and other roles in the provision and maintenance of public infrastructure, community and social needs, environmental standards, and quality of life needs. These services are essential to the social, economic and cultural development of communities at local level and benefit all users of local authority services, including businesses. They are funded from a number of different sources, including Government grants, the proceeds from the local government fund, commercial rates and certain local charges applying to either commercial or domestic users, or sometimes both.

Local authority rates and charges are significant contributors of local authority revenue, providing approximately 28% of the budgeted local authority current expenditure in 2009. It is important to note that the level of funding being made available to local authorities through the local government fund had been increasing over recent years and this had the effect of dampening the extent of demands on the commercial sector through rates and charges. While the strain on public finances resulted in a reduction in the amount of general purpose grants available for allocation to local authorities in 2009, some €905 million was allocated from the fund to local authorities by the Minister for the Environment, Heritage and Local Government towards day-to-day spending in local government, together with funding for local and regional roads from the Minister for Transport. This represents a significant and valuable contribution to the local government sector.

To put the situation in perspective, the Central Statistics Office's latest figures show that there has been no overall increase in water, refuse or other services over the past 12 months - there has actually been a marginal decline. The trend for costs for services, both in Ireland and internationally, is the "user pays" model. There is a broad consensus that this is the fairest and most equitable system of paying for vital services. The "polluter pays" or "user pays" principle is applied in particular in respect of waste management services and water services for the commercial sector.

The recently agreed renewed programme for government is committed to ensuring the financial viability of local services. In this context, the business community should welcome reforms to a system of revenue raising which they have long felt places too great a burden on the business community. The Minister, Deputy John Gormley, asked local authorities to give every consideration to businesses and to exercise restraint in adopting the annual rate of valuation. The average increase on local authority rates in 2009 was 1.15%, with a number of local authorities introducing no increase at all this year.

The Government acknowledges the need to balance raising revenue and supporting businesses. We recognise that Government charges can impact on business costs, but nevertheless, proportionate Government charges are a cornerstone of funding for local authority services. The updated programme for Government, agreed earlier this month, includes a commitment to introduce a new system for the financing of local Government, ensuring the viability of local services. The burden of local charges will be given full consideration in this process. The value of local authority services to businesses should not be underestimated. It includes road maintenance, water services, environmental enhancements such as street cleaning, litter control and public lighting, the services of community wardens, energy services, and services related to arts, culture, tourism and heritage, including local promotions.

In practice, a reduction in rates would, in competitiveness terms, make a negligible impact on the majority of ratepayers, as they are small businesses. However, a 10% reduction in rates would take a substantial amount of money out of the local authority system as a whole, at a time when it is already under considerable pressure. A further consideration in this regard is the fact that a significant amount of the rates raised remain within individual local authority areas. In this way the rates paid support local businesses and local jobs.

The Government and local authority managers will continue to take a balanced and prudent view and will continue to bear in mind the concerns of business at this difficult time. Local authorities are well aware of the pressures on their business and commercial customers, engaging as they do locally with business chambers and other organisations. The local authorities are also very conscious of the financial realities currently facing Ireland but indicate, however, that rates are not a significant barrier to doing business here.

The Government's water pricing policy requires local authorities to recover the cost of providing water services from non-domestic users of these services. Full costs include the marginal capital cost, meter installation and ongoing operational and administrative costs. The non-domestic sector includes all industrial, commercial, agricultural and institutional users of water and waste water services. Implementation of the pricing policy is in line with the requirements of the European Union water framework directive, under which member states are required to recover in full the cost of providing water services from the users of these services by 2010.

The renewed programme for Government also included a commitment to introduce charging for treated water use that is fair, significantly reduces waste and is easily applied. The Commission on Taxation report also raised the issue of domestic users paying for treated water, which would result in a more equitable sharing of the burden on businesses in this regard. Forfás undertook an assessment of water and waste water which was published in September 2008. The recommendations contained in the report are being actively considered within the Department and the local authority system to ensure that we manage our water resources in the most efficient and effective manner. In addition, the Department is currently undertaking a value for money review of water services.

The Minister for the Environment, Heritage and Local Government has signalled his intention to bring forward legislative proposals to allow for greater flexibility in setting the landfill levy. This is required to divert material from landfill which can be beneficially used in industries such as composting. It has the potential to add value to what has previously been seen as waste and to create significant employment opportunities. It will also contribute to meeting the targets for the diversion of biodegradable municipal waste from landfill. Failure to meet the targets set out in the landfill directive could result in significant fines being imposed on Ireland.

Local authorities have a key role to play in supporting and promoting business at local level. It was against this background that my colleague, the Minister for Environment, Heritage and Local Government, wrote to each county and city manager earlier this year asking that county and city councils establish a business support unit to act as a point of contact to ensure a quick, co-ordinated response to businesses from local authorities in areas such as planning, water and roads. Business units or other similar arrangements have now been established. They are there to assist individuals and businesses seeking advice and direction on business start-up and expansion. Such support is always important, but never more so than in our current economic circumstances.

I have already referred to the report of the Commission on Taxation and the renewed programme for Government in the context of the need for a widening or realignment in the funding of local government. The Government took steps recently to provide a new source of funding for local government through the introduction of a charge on non-principal private residences. This charge, which has only been in existence for some weeks, has already raised over €25 million which is going directly to local authorities for the provision of local services. The Government considers that this local charge is a significant development in the financing of local government and for the revenue raising capability of local authorities for services and projects they wish to deliver locally.

The essence of local government is that it is local. Local variations in expenditure, income and rates of charges in respect of various services are, therefore, an inherent feature of the Irish local government system. Charges take account of local circumstances and priorities and represent decisions of democratically elected local bodies. Many of the services provided by local authorities are availed of by local businesses or especially the customers of such businesses. These services must be paid for and commercial rates remain one of the current forms of local government financing.

Achieving future sustainable economic growth will demand that Government, business and all stakeholders continue to work together to ensure we get to a stage beyond the current crisis and once more equip ourselves to benefit from an upturn in international markets.

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