Áine Collins (Cork North West, Fine Gael)

I welcome the opportunity to contribute to the debate on the Bill. I begin by reminding the House that the common theme that has dominated our political history in the last 30 years is the Fianna Fáil's Party's repeated treachery in seeking to buy elections, a policy that forced us into three recessions and culminated last year in that party ceding our economic sovereignty to the European Union and the IMF. In 1977 the Fianna Fáil Party proposed, as an election strategy, to abolish rates on property and tax on motor vehicles. It proved a short-term success, with the party winning a huge majority under Jack Lynch, but it soon led to the Haughey era and the recession of the 1980s. Every economist since has accepted that a tax base which excludes property tax is unsustainable and insufficiently robust in the event of an economic breakdown.

The Minister for Public Expenditure and Reform has announced that the Exchequer contribution to the local government fund will cease from 2012 and be replaced by the proceeds of the household charge. It will be of little consolation to the households that must pay the tax, but it is important that the funding of locally delivered services is placed on a sound financial footing, with a much closer alignment between the cost of providing services and the demand for those services. It is more important than ever that local authorities receive sufficient funding to ensure they can operate effectively across their range of functions and responsibilities.

As they draw up their estimates in the coming days, local authorities throughout the State face difficult choices. In particular, both local government and central government must be mindful of the need to minimise the burden on businesses which are struggling to survive and maintain jobs. In this regard, the Government must give consideration to changes to the Valuation Acts which would allow local authorities flexibility in identifying sectors under pressure. Under current legislation, they must grant a rate reduction to all ratepayers or none. A 1% to 2% reduction is of little use to small businesses but would hugely benefit large companies such as Tesco, Aldi, Lidl and other large multinationals which already enjoy the advantage of a low corporation tax rate.

Heretofore there has been an emphasis within local authorities on reductions and efficiencies to reduce costs while at the same time seeking to maintain front-line services. However, given the huge reduction in staff numbers, it is becoming increasingly difficult to strike a balance between competing demands for resources. Most taxes depend on economic activity which produced huge budget surpluses in the boom times. These surpluses were spent in expanding State services with little regard to value for money. Moreover, other taxes were reduced in order to further inflate the economy on an artificial basis. The building boom of the last decade led to increased tax revenues but undermined the real economy.

The reintroduction of a household charge was part of the deal reached by the last Government with the EU-ECB-IMF troika. It is unfortunate that the Government is forced to introduce the tax in the midst of a severe recession. Each of us here understands the difficulties it will cause for already struggling families. These adjustments should have been made during the boom years. Taxes on property introduced at the correct time would have helped us to avoid the worst effects of the building boom on the economy.

It is often stated we no longer have the tools to guide the economy since joining the eurozone. While we no longer control interest rates and devaluation policy, we do control tax policy. That is the means by which the building boom might have been controlled and deflated. Unfortunately, the opposite was done by previous Governments. With the building industry now at a standstill, it is the wrong time to introduce a property tax. However, we have no choice in the matter. The Minister for the Environment, Community and Local Government, Deputy Phil Hogan, has kept the tax to a minimum, with exemptions for those who are unable to afford it. That the building industry was allowed to run out of control in the last ten years does not mean the Government should not support its renewal on a sensible basis. Genuine builders, tradesmen and subcontractors need support. A stable building industry should be producing 6% to 7% of GDP. The Minister has recognised this by introducing several measures which will promote the industry in a sensible way and thus create jobs.

The abolition of rates had several serious effects. It meant that county and city councils had to rely on commercial rates and commercial water rates for much of their funding. This led to an undue burden being placed on industry and the agriculture sector. This would inevitably affect our competitiveness as a nation, costing jobs in the public sector. These changes were manageable in a booming economy but have a serious effect in a recession.

Local government is the basic building block of democracy. It must be close to the people and communities and responsive to their needs on a day-to-day basis. When the Fianna Fáil Party decided to abolish rates and vehicle tax, it attacked the very basis of local democracy. That funding was replaced by a central governmental grant which was gradually reduced during the years. Central government, through the Department of the Environment, Community and Local Government, controlled the purse strings and increasingly influenced the direction of local government. This inevitably led to greater centralisation and less accountability.

The Government is concerned to ensure local government services are delivered to communities in an efficient and effective manner. The Minister is examining new and more effective ways of achieving efficiencies, including the sharing of services, outsourcing and co-operation, if not amalgamation of local development groups, including enterprise boards. This reassessment and realignment will maximise the impact of investment in creating jobs at local level and delivering front-line services. A properly resourced local government sector is vital to local democracy. This legislation represents a step in that direction by affording local authorities a greater degree of financial independence. I commend the Bill to the House.

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