Ciarán Lynch (Cork South Central, Labour)
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Question 25: To ask the Minister for the Environment, Heritage and Local Government the effect of circular letter Fin 03/2009 of 13 February 2009 on the funding of each local authority, particularly in relation to the prohibition of spending of development levies that were held on account before 1 January 2009; his rationale for issuing said directive; the estimated sum that is held by each local authority along with the total sum held nationally; the time he will keep the directive in place; and if he will make a statement on the matter. [25336/09]

John Gormley (Dublin South East, Green Party)
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In February 2009, my Department set out details of the financial requirements for local authorities relating to the overall management of their capital and current accounts. These arise from the ongoing 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 current economic and budgetary considerations require all sectors, including local authorities, to ensure effective 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 and to maintain their current and capital accounts broadly in balance for 2009. Within this general requirement, there is capability for borrowing by local authorities for capital infrastructure.

Development contributions have been an important addition to the capital funding resource of local authorities but they are only one element. Local authorities generate capital income from a variety of sources. There is no prohibition on councils spending development contributions. The only requirement on local authorities is that in aggregate capital income should equal capital expenditure in the year.

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 are taken in a way which gives the necessary prioritisation to environmental, economic and social infrastructure as part of the overall contribution to economic recovery. I recognise that these requirements may pose challenges for a small number of local authorities and I am making every effort to address this matter within the overall GGB requirements for the sector.

The accounting code of practice requires local authorities to submit their annual financial statements by 1 July. Therefore figures for 31 December 2008 are not yet available. The overall development contributions balance at 31 December 2007, comprising both cash and debtors, is some €1.524 billion. A breakdown by local authority is in the following table. These funds are being released over time as projects progress to completion.

Ciarán Lynch (Cork South Central, Labour)
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As the Minister said in his reply, the circular relates to the criteria set out by the Maastricht Treaty regarding borrowing being limited to 3% of gross domestic product. Section 3.1 of circular letter FIN 03/2009 states that it is most important that expenditure is funded by income received or due within the year. The environment committee held a meeting yesterday which was attended by the city and county managers. They were of the view, as I am after reading the circular, that development levies which were held on account on 31 December 2008 are ring-fenced and not for expenditure. A freeze has been put on this money. The Minister appears to be contradicting that view this afternoon. Will he clarify if local authorities can spend development levies held on account before 1 January 2009? There is a critical sum involved.

In September 2008, I put a parliamentary question to the Minister asking how much money in development levies was being held on account by local authorities. I still await a reply. The Minister said he would forward the figures to me, but they have not been furnished by the Department. The reason I ask this question is that the Comptroller and Auditor General told us at the start of the year that €1.5 billion was being held on account. If two thirds of that money has been spent in 2008, there is approximately €500 million still held on account. The €0.5 billion was paid by developers and people extending and carrying out other works on their homes to get infrastructural expenditure in their communities, be it water systems or a swing in a local playground. Is that money now tied up or can local authorities spend it? What the Minister said this afternoon appears to contradict what the city and county managers told the committee yesterday.

John Gormley (Dublin South East, Green Party)
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There is a requirement for clarity. The Deputy referred in his question to a prohibition on the spending of development levies. There is no such prohibition. Our intention is to ensure we have as much flexibility as possible. I am conscious of the needs of the local authorities and, indeed, I have spoken to the managers. I understand how difficult the situation is. However, it should be remembered that when we refer to the general Government balance, we are referring to an aggregate. I have spoken to my officials at length about this. What is required is continuing discussion and dialogue between my Department and the various local authorities so they can prioritise certain infrastructural projects.

There are difficulties with certain local authorities - I am aware of each of them - who have accumulated a large amount in development levies. They would like to spend as much of that as they possibly can but under the current rules that might not be possible. That is not to say they can spend nothing; they can spend. The question is how we do that and which infrastructural projects can be prioritised. It is a balancing act. We are dealing with this on a national basis. It is the only way we can deal with it because of the commitments we made under the Maastricht Treaty. We are obliged to do this, and I hope the Deputy understands that. We cannot work it in any other way.

Ciarán Lynch (Cork South Central, Labour)
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Following the Minister's response this afternoon, I suggest that he clarify this to the city and county managers because their position at the committee meeting yesterday contradicts the Minister's interpretation. Had the Minister been able to answer my parliamentary question last September he might not have been required to take such a sweeping action because he would have known what money was held on account in development levies. For the record, there is a sum of €200 million which the Minister appears to be trying to cover under the circular letter. The sum held in development levies - I can only imagine the amount-----

John Gormley (Dublin South East, Green Party)
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I have them here.

Ciarán Lynch (Cork South Central, Labour)
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-----because the Minister has not provided me with the figures even though I have been asking for them since 2008 - is in excess of the €200 million.

John Gormley (Dublin South East, Green Party)
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Yes.

Ciarán Lynch (Cork South Central, Labour)
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Is the Minister saying that if Cork City Council or Dún Laoghaire-Rathdown County Council has development levies held on account, and waiting to be spent on vital projects in local communities, the money can be spent tomorrow morning?

John Gormley (Dublin South East, Green Party)
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No, I am not saying that. There is no prohibition on it being spent but it requires the council to speak directly to my Department to see if it is possible under the circumstances. I will supply the Deputy with all the details. He asked about county and city councils and the figures are detailed in the reply. There is no blanket ban on these councils spending money. That is simply not the case, although that is what the Deputy implied in the question. It is not true.

Ciarán Lynch (Cork South Central, Labour)
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If the Minister-----

Charlie O'Connor (Dublin South West, Fianna Fail)
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Deputy, we must proceed.

Ciarán Lynch (Cork South Central, Labour)
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This is a huge issue.

Charlie O'Connor (Dublin South West, Fianna Fail)
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The Deputy will have to find another way to deal with it.

Ciarán Lynch (Cork South Central, Labour)
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With the indulgence of Deputy Hogan and others, this is a huge issue.

Charlie O'Connor (Dublin South West, Fianna Fail)
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The Deputy is eating into his colleague's time.

Ciarán Lynch (Cork South Central, Labour)
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The Minister must be very clear on this. He should check the record of the committee meeting yesterday. The county and city managers are on record as having an entirely different interpretation, which is in section 3.1 of a letter sent to them by the Minister. The Minister's words are in black and white and state that they cannot spend this money. The Minister is saying this afternoon that they can. He must issue a statement. He is a fair man for going out onto the plinth to make a comment when it suits him. He needs to go there this afternoon and clarify this.

John Gormley (Dublin South East, Green Party)
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At the risk of repeating myself, the Deputy states in his question that there is a prohibition on spending of all development levies. That is not the case, there is no such prohibition in place. However, we must comply with the Maastricht criteria and we are doing that through intensive dialogue with the various local authorities. My officials are working intensively on that.