Dáil debates

Thursday, 17 November 2005

Adjournment Debate.

Local Authority Funding.

5:00 pm

Photo of Catherine MurphyCatherine Murphy (Kildare North, Independent)
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I thank the Ceann Comhairle for allowing me to raise this important matter.

The way in which local authorities are funded has a bearing on their ability to deliver services. I will focus on developing counties such as Kildare. The needs and resources model of funding is a historical one. When it was put in place guarantees were given that no council would lose funding. This guarantee automatically placed growing counties at a disadvantage. While the fund has increased over the years, it is not fairly distributed.

I will outline several practical examples of this unfairness. Kildare County Council does not produce water but buys it from Dublin City Council and Fingal County Council. Given the county's rapid increase in population, the cost of buying water continues to increase. The 2002 census bears no relation to the current population of County Kildare, which has increased by at least 30,000 in recent years. This has resulted in the county's funds being stretched even further.

While the people of County Kildare are delighted that several new, albeit long overdue, playgrounds have been built, these facilities are expensive to supervise and maintain and receive no funding for maintenance until they are in place and costs can be calculated. The problem with this approach, however, is that there is no guarantee that these costs will ever be included in maintenance funding. In other words, councils take a gamble when they introduce new services.

Yesterday, during the debate on housing Deputy Fleming criticised some councils for not including sufficient funds for disabled person's grants, for which one third of the cost must be covered by local authorities. The reality is that Kildare County Council has little discretionary spending. Counties Laois and Offaly, on the other hand, do very well from the local government fund and have lower than average commercial rates, which indicates the discrepancy between councils and the improvements that could be made.

I have analysed a series of figures. Allocations under the local government fund in 2004 indicates that south Dublin receives the lowest per capita transfer at €97, while County Kildare is third worst off. The highest per capita amount is paid to County Leitrim which receives more than €500. The figures demonstrate the considerable variations between local government fund allocations.

A second set of figures relates to the disabled person's grant. County Kildare receives a per capita allocation of €5.70, the lowest in the State, while Leitrim, at €103 per head of population, again receives the highest allocation. The key issue in this regard is discretionary spending and the failure to understand the dynamics of a growing area. When calculating budgets, certain items, for example, salaries, pensions, insurance, loans, materials, heat and lighting, must be included. However, it is only when one examines areas over which one has discretion that the budget becomes interesting. In a wealthy economy the public has a right to expect services in discretionary expenditure areas, such as community and leisure facilities, libraries, traffic calming and management, but it is in these areas that counties with growing populations are paying the price in terms of a lack of funding.

I have also analysed levels of commercial rates. The business sector is critical of increases in rates above the rate of inflation but frequently the choice facing local authorities is whether to reduce services or increase commercial rates. The Minister will no doubt provide figures to show how much the local government fund has increased over the years. It is sobering to note, however, that when I examined the allocation for County Kildare under the fund last year, it was only sufficient to buy additional water for new residents and pay increased costs arising from upgraded wastewater facilities and benchmarking and did not allow an increase in discretionary funding. This is indicative of the problem I have highlighted.

I ask the Minister for the Environment, Heritage and Local Government to bring the issue of discretionary spending before the Government. Areas such as Kildare, west Dublin, Meath, Wicklow, Louth and north Wexford are entitled to equity in services. It will not be possible to ensure such equity until the disparities in the funding model used is addressed. I ask the Minister to do so.

Photo of John O'DonoghueJohn O'Donoghue (Kerry South, Fianna Fail)
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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.

The Dáil adjourned at 5.30 p.m. until 2.30 p.m. on Tuesday, 22 November 2005.