Phil Hogan (Carlow-Kilkenny, Fine Gael)
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Question 3: To ask the Minister for the Environment, Heritage and Local Government the implications that circular 03/2009, which restricts local government finance, has on current infrastructure projects; and if he will make a statement on the matter. [18404/09]

John Gormley (Dublin South East, Green Party)
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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.

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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The Department and the Minister have advised all local authorities that they are required to ensure expenditure is funded by income received or due within this year. This is a serious instruction. Will the Minister spell out its implications for schemes that have been announced for 2009 and contracts that have been signalled to local authorities for 2009? Will they go ahead this year?

John Gormley (Dublin South East, Green Party)
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There has been controversy in some quarters, but only four local authorities are affected in terms of development levies etc. The figure amounts to approximately 14% of total spend. As the overall capital spend is approximately €6 billion, I do not anticipate a significant impact.

I will supply some details. The general state of the economy and the need for prudent management and control of the public finances impose a deeper level of discipline in and management of all areas of public investment. Local authorities, like other parts of the public service, must manage their operations within these constraints. In this context, a key requirement is to advance and manage projects in a way that takes account of environmental, economic and social priorities.

The overall capital spend will be in excess of €6 billion and local authorities will contribute significantly to economic renewal. The spend comprises an investment of €2 billion in housing, more than €1 billion on roads and several hundred million euro each on water, the environment and local amenities. I do not anticipate a major problem. There will be some degree of difficulty, but it can be exaggerated in some quarters. However, I do not anticipate there will be a huge difficulty regarding some of the main infrastructural projects such as, for example, those discussed earlier like water infrastructure.

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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Fingal County Council has €70 million in development levies available to it that it cannot spend because of the restriction the Minister has imposed and the announcement that has been made. Will the Minister review the position of those local authorities that have funds available, such as Fingal County Council, with a view to maximising their output for contractual obligations on essential water and infrastructural facilities that all Members wish to proceed?

John Gormley (Dublin South East, Green Party)
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The local authorities and their managers in particular are in constant contact with my Department. As this is done on an aggregate basis, it must be calculated to ensure that certain local authorities can borrow sufficiently and this probably constitutes a bigger problem. I understand that only four local authorities are in a position to spend those development levies. However, and I believe the Deputy's party agrees it is essential to exercise financial prudence and fiscal rectitude in all those matters.

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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Welcome to the real world.

John Gormley (Dublin South East, Green Party)
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I have been reading the highly interesting document on local government that Deputy Hogan published today on the Internet. However, the Government must abide by what has been set down in the Stability and Growth Pact under the Maastricht treaty. As the Deputy is aware, Ireland has received considerable latitude from Brussels in respect of exceeding the 3% limit, and we have gone far beyond it. However, we must abide by the pact and those criteria are set down both by Brussels and subsequently by the Department of Finance.