Thursday, 1 December 2022
Ceisteanna Eile - Other Questions
10. To ask the Minister for Housing, Planning, and Local Government his plans to review the baseline of self-funding property tax for local authorities like Dublin City and Fingal, in order that they can hold onto 100% of local property tax collected without losing other funds of streaming. [59834/22]
Last week Dublin City Council passed a €1.2 billion budget. It is one of largest budgets it has ever passed. Over recent years the Government has supported many local authorities throughout the country. However, there are challenges with regard to local government funding. We want local authorities to hold onto 100% of the local property tax in their area. When might we review the baseline for funding for local government?
I thank Deputy McAuliffe for his question. I acknowledge that all 31 local authorities have passed their budgets. This is a huge achievement by the sector in very challenging circumstances. We continue to support them in doing this. Local property tax was introduced to provide a stable and sustainable funding base for the local authority sector, providing greater levels of connection between local revenue and associated expenditure decisions. Local property tax broadens the tax base by reducing the level of central funding required by local government.
As committed to in the programme for Government, Our Shared Future, the move to 100% retention of local property tax will take place in 2023. A move to this model will lead to an increased surplus for those authorities with local property tax income above their funding baseline, such as Dublin City Council and Fingal County Council. These authorities shall now retain a greater proportion of that surplus for their own use in 2023; an increase from 20% of the overall yield this year to 22.5% next year.
A comprehensive review of the local property tax baselines is under way and is expected to conclude in advance of the local authority budget process for 2024. This review will take into account the overall funding position of all local authorities and the self-funding requirements will be considered in this context. Any proposed change to the current model will need to take into account the needs and resources of all local authorities, including those that have less ability to raise income and will need to be considered within the parameters of the national fiscal and budgetary situation and the competing priorities presenting themselves at a national level.
I welcome the commitment to review the baselines. If I heard correctly this will be done in advance of the 2024 budget process. Local government funding is a bit of a dark art. I spent ten years in local government and I still cannot get my head around a lot of it.
It is about retaining the local property tax in that locality, because if people pay the tax, they expect those services in that area. While some counties may need more funding, that is a matter for national government, not local government. This is a new concept in this country, but we have to make sure we stick to the principle.
Unfortunately, because of baseline funding that sets the level of self-funding, while the property tax gathered will stay in the county, the problem is that grants will be reduced, to the tune of approximately €52 million in Dublin city and by a similar figure in Fingal. We are letting councils keep 100% of the property tax but we are reducing the other grants they have. I welcome the review because it will address that situation.
The review is a very important mechanism to ensure we have equity throughout the network of 31 local authorities. What is key is the way the Government has intervened this year, in very challenging circumstances, to support local authorities via several funding streams, such as the energy support grant, which has assisted them in completing their budget, and the pay model, through which pay agreements will be refunded and for which we have ensured local authorities will get 100% support. This is in addition to the many acute challenges of rates revaluation. In working with the Minister, additional funding has been allocated that will assist them in the coming year. These are challenging circumstances but local authorities are doing incredible work. It is a testament to the network that they all passed their budgets on time, which we value.
I met the team from Dublin City Council last week, along with all Dublin Deputies, and I met with the finance subcommittee. Many good councillors from across parties want to see more done for their county with more resources. I welcome the Minister of State's commitment, and I thank the Minister, both Ministers of State and their party colleagues for working with us on this to deliver this review.
The Minister of State mentioned pay, which is another element to this. Dublin City Council has stated that, in the next two years, the additional pay commitments arising out of wage agreements will amount to €41 million. However, the amount of essential Government funding will be €35.8 million of the €41 million. The answer I got from the Department of Public Expenditure and Reform stated this is 100% of funding. We need to find the gap and nail it down. I also look forward to Jim Gavan's report on local government funding. We can do a lot more on this. There are local taxes that Dublin City Council and other councils could administer and there are local decisions. The more power we devolve to local government, the better.
A large proportion, around €287 million, goes towards pay agreements and assisting local authorities in meeting those commitments. The Department is also doing a separate piece of work with the Department of Public Expenditure and Reform and the local authority network to try to get to the bottom of the funding refunds. An estimate in the local authority system of how much pay will be has to calculated in advance of the refund for the pay agreements, and that has to be reconciled properly. We are committed to supporting local authorities, and the provision of €287 million is a key a factor in demonstrating that. It will ensure they pass their budgets and citizens have the certainty their services will be protected.