Thursday, 21 October 2021
Saincheisteanna Tráthúla - Topical Issue Debate
Gabhaim buíochas leis an Aire Stáit as teacht isteach cé go bhfuil díomá orm nach bhfuil an tAire Tithíochta, Rialtais Áitiúil agus Oidhreachta anseo anocht. The problem with the current system of distribution of the equalisation fund is that it is neither open and transparent nor equitable. Persistent questions from me over the years have failed to get the rationale behind the current system. This has left a number of councils underfunded, even with the distribution under the equalisation fund, and they now have an ensuing crisis in services and staff levels, which is seriously inhibiting their work.
The report of the expert committee established by the previous Minister to examine the amalgamation of Galway City Council and Galway County Council came to the conclusion that both local authorities in Galway were underfunded and that this issue needed to be addressed forthwith. In fact, even though it was in favour of amalgamation, it said the funding crisis had to be dealt with first. In Galway County Council, where the crisis is more extreme, it has left virtually no staff to look after planning enforcement throughout the county. It has resulted in a situation where the planning officers dealing with planning applications have to deal with twice as many applications as equivalent planning officers in the neighbouring county deal with. There are no staff, or a totally inadequate number of staff, to deal with housing adaptation applications, mobility aids and so forth. While the Department is offering an increasing number of grants to local authorities under various schemes, both rural and urban, other sections are finding it very hard to progress their applications in a suitable way, thus stymieing the development of the county.
County Galway stretches from Ballinasloe - on my way home tonight I will be halfway home when I get to Ballinasloe - to Inishbofin, Cleggan, Clifden and Ballyconneely, which are 160 km apart. In fact, uniquely, when one is driving there one has to go through another local authority to get to the western half of the county. It also stretches from Milltown and Dunmore in the north to Gort and Portumna in the south. A huge area of land is losing out, and it is creaking under the current system. I pay tribute to the staff who have soldiered on, but who are now at breaking point. The reality is that it is sometimes very hard to contact the staff, through no fault of theirs. They are just too busy trying to fire fight in getting planning permissions and planning decisions dealt with.
I am sure the Minister of State has been given a very fancy script. I received a reply to a parliamentary question today which gave me a lot of twaddle about 15%, the local property tax, LPT, and so forth. I am telling the Minister of State to go back to the Department and examine how it arrived at the system for distributing the equalisation fund. If he cracks that one, he will have cracked a greater mystery than I have ever seen anywhere else. Agatha Christie, Sherlock Holmes or the whole lot would not crack the mystery of the equalisation fund distribution, which dates back about ten years and has left Galway strapped for cash.
I thank the Deputy for giving me the opportunity to outline the Government's supports for local authorities, with particular reference to Galway county. As the local authority budgetary period will shortly be under way, my Department has notified Galway County Council and all other local authorities of local property tax allocations for 2022 and of a separate allocation as a contribution towards the additional costs that will arise in 2022 as a consequence of the national pay agreements and the unwinding of the financial emergency measures in the public interest, FEMPI, legislation. The allocation in respect of Building Momentum - A New Public Service Agreement 2021-2022 is €4.44 million for Galway County Council and its objective is to reduce the cost of pay and pensions next year. In light of the Deputy's concerns about staffing, I trust it will be welcomed.
Turning to the funding position more generally, LPT was introduced to provide a stable and sustainable funding base for the local authority sector, helping to provide greater levels of connection between local revenue and associated expenditure decisions. LPT broadens the tax base by reducing the level of central funding required by local government. Local retention of the LPT began in 2015 and since then the overall principles and allocation methodology have broadly remained the same. Currently, 80% of LPT is retained in the area in which it is collected, with the other 20% supporting equalisation for local authorities with LPT bases lower than their funding baseline. The programme for Government, Our Shared Future, commits to bringing forward LPT reforms, including providing for all money collected locally to be retained within the county. This will also be done on the basis that those counties with a lower LPT base are adjusted via an annual national equalisation fund paid from the Exchequer, as is currently the case.
The Finance (Local Property Tax) (Amendment) Act 2021 gave effect to a package of measures in line with the commitments in the aforementioned programme for Government to address the future of the LPT. In accordance with this legislation, the Revenue Commissioners are currently conducting the first LPT revaluation exercise, with returns from property owners due to be returned by early November. As the timeline for the revaluation exercise does not fully align with local authority budgetary timelines, including the municipal district budgetary process, LPT allocations for 2022 have been provisionally based on the 2021 LPT yield, with no change next year to the allocation model, that is, the 80:20 model. All other elements will also be based on 2021 figures, including the LPT baselines, the equalisation contribution and self-funding of housing and roads from surplus LPT. The Government has signalled its intention that the move to 100% local retention of LPT will be introduced over the 2023 and 2024 budgetary cycles. Any changes to the allocation process and funding baselines may be considered in that context.
My Department recently confirmed LPT allocations to local authorities for 2022 amounting to €524 million, a figure which includes the impact of local variation decisions. The allocation to Galway County Council from LPT is €14.5 million. This includes €2.7 million of equalisation funding, as the 80% of the LPT retained locally in Galway's case is lower than the baseline or minimum funding level. It is relevant in this context that the elected members of Galway County Council have the option to increase or decrease the local LPT rate which, as with all budgetary matters, is a reserved function of councillors. Galway County Council has not opted to avail of this opportunity for 2021 or 2022. The council would have benefitted from an additional €2.2 million in 2022 if the members had applied the 15% upward variation next year in the same way as many other authorities have done. Eleven local authorities in a similar position to Galway County Council have decided to maximise their benefit from the upward variation mechanism next year. Separate to any general examination of baselines, it is the long-standing position that the Department will not allocate additional LPT funding to local authorities that have declined to use the revenue-raising tools available to elected members.
Across all schemes and funding sources my Department provided €51.1 million in 2019 and €82.9 million in 2020 to Galway County Council. The increase in 2020 was due to an increase in capital funding for housing as well as funding in respect of the Covid-19 commercial rates waiver and for additional expenses and lost income linked to the pandemic. Galway County Council also received a once-off allocation of €1 million for 2021.
This money was linked to the operation of municipal districts and was subject to a small number of requirements, including that the funding be divided equally among the municipal districts. My Department is currently reviewing correspondence issued by the council in respect of this funding to determine if each of the conditions have been complied with.
In the Local Authority Times, a publication of the Institute of Public Administration, IPA, two researchers came to the following conclusion:
Equalisation is a key element of a country’s inter-governmental fiscal arrangements where functions and funding are decentralised to subnational government. Although Ireland is a highly centralised country with limited responsibilities and powers devolved to local authorities horizontal fiscal imbalances exist and persist. Ireland has a system of equalisation transfers but we believe that the current model is not fit for purpose.
They continued to construct a more equitable and logically based fiscal model. The Minister of State seems to be saying today that we know it is unfair and that there is no justification. No justification has been given to me today as to how the equalisation fund was arrived at. However, it is proposed to blackmail people in Galway with the same value of house to pay more money before we undo an objective injustice. That is what the Minister of State is telling me and it is totally unacceptable. In addition, this would not solve the problem of the inequity because it is much deeper than that.
The second point is that this mechanism of raising it was actually meant for extra services, all other things being equal, not as a mechanism to cover up for an unfair system coming from the Custom House. At the end of the day, it will not address the fundamental issue which is that there is no basis in logic to the present system. If an individual suffered in this way, a case would already have been taken to the Ombudsman and the inequity would have been put right.
A Programme for Government - Our Shared Future commits to reform in funding of local authorities. What has been done to date other than tinkering at the edges? The LPT reform has nothing to do with funding local authorities; it is about how much the public pays. We need comprehensive reform now and not at some date in the future that is constantly deferred. The cumulative damage done to Galway County Council is already very serious.
As has been set out in the circular from the Department, when additional information on the updated LPT is available the process will be re-examined. While it is unfortunate that the process cannot take place in advance of the local authority budget process in November, the timeline involved takes account of the needs of property owners and the Revenue Commissioners in conducting re-evaluation. As part of this process, my Department will review relevant material, including the report compiled by the Whitaker Institute of the National University of Ireland Galway and other reports on local authority funding which have been published in recent years. The Department will also engage with relevant stakeholders. Notwithstanding that, any examination of funding following the LPT re-evaluation exercise is not intended to be a substitute for the statutory role of elected members and their responsibilities under the Local Government Acts.
The Deputy has raised a critical point about the future funding of local government and revenue-raising abilities as seen in other countries, where local authorities have the ability to set up energy supply companies and be involved in revenue-raising activities. I cannot give an update of the work of the Minister of State, Deputy Peter Burke, within local government on those elements.
It is important that we consider those issues.
We should be giving consideration to participatory budgeting where members of the public have a say in how their LPT revenue is spent. All those elements are critical in taking ownership of the revenue that is raised by local government and giving people a say in how it is spent in their own communities. My own local authority issues a newsletter to every household to inform members of the public how their money is being spent, and the projects and other important work it is doing in communities. I will take back the Deputy's comments to the Minister of State, Deputy Peter Burke.