Ciarán Cuffe (Dún Laoghaire, Green Party)

Before I begin I would like to pay tribute to all the officials and staff who contributed to the Planning and Development (Amendment) Bill which was passed in the House earlier. I did not get an opportunity to put my thanks on the record of the House and I do so now.

I am taking this Adjournment debate on behalf of my colleague, the Minister for the Environment, Heritage and Local Government, Deputy John Gormley.

The short answer to the Senator's question is the Stability and Growth Pact but I will go into some detail in the reply.

I begin by pointing out to the House that capital funding to local authorities has not been frozen. In 2010 local authorities have budgeted for capital expenditure of around €4 billion. That will be financed through grants, loans and other capital income.

In February 2009, the Department of the Environment, Heritage and Local Government set out details of the financial requirements for local authorities relating to their overall management of capital and current accounts. These requirements flow directly from the requirement 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.

The Government set a limit of €200 million for the contribution of the local government sector to the deterioration in the general Government balance, GGB, in any one year. This was not a new requirement. However, the downturn in the economy and substantial pressures on Government funding generally required a sharp focus in all sectors, including local authorities, to ensure effective control and management of public finances.

In order to stay within the overall GGB limits, it is necessary for local authorities to maintain both their current and capital accounts broadly in balance. Development contributions, which the Minister understands are at issue in this case, were an important addition to the capital funding resources of local authorities in recent years, but were only one element. There is no specific prohibition on any local authority spending development contributions per se. The only restriction on local authorities is that, in aggregate, capital income must equal capital expenditure in the year.

Balance is only required at an overall level and this allows considerable scope for authorities to draw on their own development contributions as an element of their overall investment programme. The precise manner in which capital and current accounts are managed to achieve the overall balance necessary is a matter for individual local authorities themselves.

Within the overall limits there is additional capacity for non-mortgage borrowing by local authorities. Subject to the maintenance of balanced current and capital accounts, and allowing for the repayment of existing borrowings, up to €250 million in new loan finance can be made available to the local government sector annually to fund capital investment in necessary infrastructure projects.

For 2010, the process of prioritising loan applications for such projects has already been completed. During this process the Department has been guided by local authorities in respect of the most critical projects requiring funding at this time. Final sanction to local authorities to draw down loan financing is being provided as required throughout the year.

While the Minister appreciates that these GGB requirements impose limitations on local authorities, there are considerable funding constraints at all levels of Government and local authorities cannot be immune to the effects of the downturn in the economy.

As the Minister has already indicated, it is a matter for every local authority, including Fingal County Council, to determine its own spending priorities in the context of the annual budgetary process having regard to both locally identified needs and available resources within the GGB limits as set out here. In this regard it may be of interest to the House to note that in 2010 so far some €15 million in new loan financing has been allocated to Fingal County Council for capital investment projects.

The Department will continue to work with all local authorities to ensure that, within the context of the overall GGB requirements, decisions on matters of capital investment are taken in a way which maximises available resources and gives the necessary prioritisation to the environmental, economic and social infrastructure.