Malcolm Noonan (Carlow-Kilkenny, Green Party) | Oireachtas source

Gabhaim buíochas leis an Seanadóir as an gceist seo a ardú. It is a really interesting question. He and I have debated this on a number of occasions, both in the Chamber and in these corridors.Local government services such as those referenced in the matter raised here today are funded in a variety of ways. Some programmes are supported by Exchequer funding and others from local authorities' own income, often a combination of both. Local authority income, in turn, comes from sources such as commercial rates, local property tax, charges for goods and services and, importantly in the context of the matter raised, through borrowing.

There is a framework in place to manage local authority borrowing, with authorities having recourse to the Housing Finance Agency, retail banks and to both the European Investment Bank and the Council of Europe Development Bank. Municipal bonds do not form part of this framework and are not considered necessary at the current time, although they could be given consideration.

Local authority borrowing and overall compliance with fiscal rules are managed and monitored by the Department of Housing, Local Government and Heritage, in conjunction with the CSO and the Department of Finance. These rules form part of the EU Stability and Growth Pact, which has its origins in the Maastricht treaty. Under the pact, there is a limit on budget deficits across the EU. As part of this, the general government balance, GGB, monitors borrowings and budget surpluses or deficits across the wider government sector, which includes local government.

Adherence to these rules by individual authorities requires a balanced revenue account and keeping the net increase in non-mortgage borrowing within approved levels. It is for this reason that local authorities are required to seek sanction from the Department, or to quote from the legislation, from the appropriate Minister, for all borrowing, over and above the requirement for formal approval by the elected members.

Expenditure of local authority reserves or own resources, including development contributions which often contribute to community infrastructure such as lighting and footpaths, is also subject to GGB limits. In order to ensure Ireland remains compliant with the overall pact, local authorities have been directed that capital expenditure should generally not exceed capital income within the reporting year. Notwithstanding that, within the overall limits, there is capacity for the expenditure of capital balances and own resources, subject to sanction. In reviewing requests for both borrowing sanction and the expenditure of reserves, consideration is given to ensuring that priority infrastructural investment can proceed, that contractual commitments and ongoing projects can proceed; and that development contributions already collected and aligned to specific capital projects can be utilised efficiently. The Department makes every effort to facilitate all such requests.

Compliance with the pact means that member states must avoid deficits above 3% of GDP and must limit public debt to 60% of GDP. To put that in context, in 2020 Ireland recorded a deficit of 4.9% and a debt to GDP ratio of 58.4%. There is therefore a need to carefully manage any proposed increases in local authority borrowing within the overall envelope. There are no current plans to expand the borrowing options available to local authorities through the introduction of municipal bonds, which as I have said are not at present a feature of the local government funding model. Having said that, it is critically important that research is done into alternative sources of funding for local authorities. The Senator mentioned that research piece.