Catherine Murphy (Kildare North, Social Democrats) | Oireachtas source

It is fair to say that how local government is funded in Ireland is so opaque that most people find it difficult to get to grips with the origin of the system. When the local property tax was introduced in 2013, it was based, as we know, on the market value of a house or apartment. It does not, however, take into account people's ability to pay with the exception of allowing for deferral on the grounds of hardship. It does not take into account the equity. In situations where a house is in negative equity, the market value still applies. Those are significant issues for a local property tax.

The tax is not collected locally as it is in most other countries. It is instead collected by the Revenue Commissioners. A previous contributor talked about the high level of compliance and that high level exists because the tax is collected by the Revenue Commissioners. In most other countries, the tax is collected locally. In this situation, if the tax is not paid, it is a charge on the property. In circumstances where taxes are raised and collected locally, there is often a political choice about how much tax is raised and what it is intended to be spent on. This is a local tax. It is an issue that is politically defining. Left-wing governments often raise more taxes and collectively do more things. I have friends who live in France. They pay a lot of local property tax but they get childcare, elder care, summer activities, local policing and high levels of maintenance. There is a vast difference across Europe and in places such as France, taxpayers pay their tax collectively and feel they get some value in return.

We have a centralised system of decision-making and our local government is more like a system of local administration because many of the functions and decisions are taken by the Executive, the paid officials, rather than the directly-elected councillors. Long leasing of social housing from vulture funds is in the news at the moment and councillors were the last ones to know about that. It is very much a feature of our local government and administrative system.

When local property tax was introduced in 2013, we were told it would improve local amenities. According to the Department of Housing, Local Government and Heritage website:

Local Property Tax allocations paid from the Local Government Fund help fund essential local services such as, public parks; libraries; open spaces and leisure amenities; planning and development; fire and emergency services; maintenance and cleaning of streets and street lighting – all benefitting citizens directly.

There is no doubt but that those are all valuable services but the expectation was that there was going to be something additional when the local property tax was introduced. That was how it was sold. In fact, what happened was the local government fund, which was made up of the local tax receipts, was gradually withdrawn over a few years when the local property tax was introduced. The property was a replacement tax rather than an addition. It is not unusual for people to ask what they are getting for the taxes they pay because they have not seen the additionality they expected to see when they were paying an additional tax.

The main thrust of the legislation before us is to do a revaluation and to bring houses and apartments that were built since 2013 and were excluded from the tax until now into the local property tax. Will that mean there will be more money available to be spent at a local level? The issue is that it will not, necessarily. The method of distribution of the local property tax has not changed since the fund was made up from the motor tax fund. The system of distribution of the tax is broadly the same. It goes back to the needs and resources model from the year 2000.

Basically, it counts the needs of a council. If, for example, a council had 1,000 staff, ten libraries and four swimming pools, the matching resources were calculated to meet those needs, hence the needs and resources model. A baseline was set for each council based on this. The problem was that not every council was starting from the same baseline and the model took no account at all of the population and shifts in population. It still does not take any account of that. Essentially, areas that did not exist in the year 2000 will have needs as a consequence of a whole new community being built. And yet, there is no provision whatsoever within those baselines. The Minister spoke about this possibly being changed in the future but I have been listening to this for a decade or more.

Staffing levels are very uneven across the country. County Meath, for example, which is a growing area, has somewhere in the region of 650 staff whereas County Kerry has 50,000 less of a population and more than 1,000 staff. It is a complete mismatch and that is for historical reasons. The whole point, however, is that we evolve that over time to create some degree of fairness. It is the same case with facilities such as swimming pools, for example. County Kildare has only two public swimming pools for a population of 220,000 people. That is for one pool for every 110,000 people whereas our standard is set at one for every 50,000 people. Our funding system has nothing to do with population density and yet the baselines take no account of that whatsoever.

Counties such as Fingal, Kildare and Meath, which have rapidly growing populations and evolving needs, never get the resources to catch up. The baseline for those areas remains stuck in time. That one-dimensional development causes a huge amount of resentment. People will say that all they get are more and more houses but not the matching facilities and services. One then must have the fundraisers and all the rest. I am not saying that is not required anyway but the resources are not there to match that. The expectation was that the local property tax could be an aspect of that. The way it is designed, however, mitigates against that with regard to the baselines.

Consider the totality of what the various councils receive. I looked at the total income for each of the local authorities because people might say that a particular county might have more in commercial rates or might get more from another source of funding. If one looks at the total income for each local authority and make some comparisons, however, it gives some sort of an understanding of how daft our system is. I will leave places like Leitrim and Dublin out because they are unique; one is a capital city and one has a very tiny population in what is geographically a fairly big area.

Let us look at counties Wicklow and Mayo, for example. Wicklow has a gross expenditure of €91 million. Mayo has a gross expenditure of €125 million. Wicklow has a population of 142,000 and Mayo has a population that is 12,000 lower, at 130,000. Wicklow has €35 million less to spend than Mayo. We might then look at what happens with the property tax in those two counties. We have already established that Mayo has €35 million more to spend and has a smaller population. Both have many towns and a big rural area so they are quite similar. Included in their income is the local property tax. I am using 2017 figures because I previously made a submission on this. They have not changed much since, however. As the Minister knows, the local property tax has not changed and that is what this Bill is about. Wicklow took in €17 million in local property tax and Mayo collected €10 million. Wicklow had a benchmark of just €8.5 million, however. This is going back to the needs and resources model from the year 2000. It had a benchmark that was set at €8.5 million while Mayo had a benchmark of €19.8 million.

Wicklow was, therefore, stuck in time. It did not matter that it was growing or that it had additional population and new needs. Wicklow, with a bigger population and less money, was deemed to have €13 million in excess of what was needed from the local property tax. It had to put 20% into an equalisation fund and was then restricted in what it was permitted to spend from some of the remainder of the local property tax. This is called the self-fund element and it must be spent on capital projects instead of funding being provided through central funds. This is where we really need to be paying attention regarding how local property tax is supposed to fund councils. Roads and housing are deemed to be the two areas on which councils must spend their money.

We know that Wicklow took in €17 million in local property tax and Mayo took in €10 million. Mayo, however, got €19.8 million out of the fund, even though it had a bigger income from all the collective sources. I am not saying it does not need the money and would not have the ability to spend it. The unequal nature of these baselines are highly problematic and make it very difficult to argue that this is a fair tax, even if one takes the other issues into consideration.

I received a reply to a parliamentary question from the Minister stating that the 20% equalisation fund would be phased out and councils would retain all their tax. The problem with the baselines, however, is what they now require of local authorities. If the local authorities take in a lot more money, the baselines will mitigate them having the discretion to spend that money on the things they deem to be needed in their county, even in counties with a very large growing population. They must spend it on roads or housing. Only six or eight counties fall into that particular category. Essentially, what will happen is the central Exchequer will reduce the amount of central government grants that will go to those counties, even though they are less well-off than some other counties when one looks at their total income.

People are right to ask what they are getting for this local property tax. It is a fair question. They want to see the additional services. They do not want this one-dimensional development where they see rows and rows of housing without the ability to fund parks and playgrounds, normal maintenance or things one would expect to see. We are going into a very challenging time as well. Local property tax made up between 8% and 10% of council budgets but obviously now with Covid-19, commercial rates will be very significantly hit. Welcome and justified subsidies were given to the commercial rates sector in the context of Covid-19 but there will be a lot of recovery and a loss of income there in terms of the commercial rates. That will make these baselines even more problematic and those councils, which appear to be well-off, will be well-off in terms of growing populations but not with the services to match those growing populations.

On a number of other points, I believe the 3% interest should be 0% interest.

We are really talking about people who are very poor and who are having to go and seek deferrals on the basis of their just not having the ability to pay. I do not understand why we would be charging interest on a deferral. It is something which would at least be of some assistance. I have seen so many pensioners who are struggling to try to pay their local property tax. I have told them they really should consider deferring. When you start seeing people deciding not to heat their home or not spending money on things they should be able to afford and which they need, in many cases it is because they do not want to leave a burden for their family. That is the kind of thinking here, particularly with older people. There are many different ways a local property tax system could be designed, and it can be done in a fair way. The distribution of the resources is equally important and we have go that very badly wrong; it is very unfair. The more people appreciate it is unfair and do not see a return on it, the more significant resentment builds up.

The local government system is overly centralised. It is not fit for purpose when compared with local government systems across Europe, many of which have many more functions than ours has here. We have far too much localism at a national level and not enough discretion at local government level. That must be looked at in the context of how we fund our local government system.

See this speech in context