Seanad debates

Thursday, 15 November 2007

2:00 pm

Photo of Pearse DohertyPearse Doherty (Sinn Fein)
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Cuirim fáilte roimh an Aire Stáit go dtí an Teach fá choinne an cheist seo a phlé. Ba cheart dúinn cead a thabhairt do na comhairlí chontae ar fud na tíre airgead a bhailiú ó úinéirí tithe saoire ar fud an Stáit. Cuideodh sé sin leis na húdaráis áitiúla seirbhísí éagsúla — seirbhísí níos fearr agus seirbhísí úra — a chuir ar fáil sna áiteanna ina bhfuil na tithe saoire lonnaithe.

This matter revolves around the need for the Minister for the Environment, Heritage and Local Government to give local authorities the option of levying an annual charge on holiday homes and thereby providing them with a contribution towards the public services they provide. The imposition of such a charge would also allow councils to provide additional and enhanced services.

Everyone is aware that there is a huge gap in funding for local authorities. It is becoming more difficult for local authorities to meet the increasing demands relating to the provision of services in their areas. There has been an increase in the level of own resources a local authority must raise to contribute simple matters such as roads. In the previous debate we discussed the issue of having adequate and safe roads. Local authorities are also responsible for providing sewerage schemes, housing and a wide range of other services.

One of the ways local authorities bridge the gap in funding to which I refer is by means of the development contribution scheme, which relates to the construction sector. This scheme is unfair to a certain degree because it places a major burden on young people who are starting out in life and trying to build their own homes and who are obliged to make large contributions, via a huge levy, to the services provided by councils.

Will the Minister of State consider giving local authorities the option to levy a charge in respect of holiday homes? As he is aware, the number of holiday homes in the State increased significantly in recent years. My home county, Donegal, has more holiday homes than any other. There is no doubt that holiday homes bring advantages to an area. They help secure jobs in the construction sector and they attract tourism. There is a need to levy a charge in respect of such homes because most of those who benefit from having second homes in Donegal and other counties do not pay through general taxation because they live outside the State, nor do they pay a contribution towards the services provided by local authorities.

According to the 2006 census, there are 8,275 holiday homes in County Donegal. Throughout the State, meanwhile, there are 49,789 holiday homes. I refer here to holiday homes as opposed to second houses of residence or vacant homes. There are, for example, far more vacant homes throughout the State.

There is a need for the Government to address the matter of holiday homes. This is not a new issue. In 2003, Donegal County Council, with cross-party support, made an application to the Government that a measure such as that which I am seeking should be put in place. The response then, and in every subsequent year, was that the Government was awaiting a review of local government financing to be carried out by Indecon.

A report on this matter was submitted to the Government by Indecon in October 2005 and published at the start of 2006. While I disagree with many of the findings in that report — the Government parties also disagree with them — it is interesting that recommendation No. 7 supports the idea of introducing mechanisms to secure contributions to local authorities' general funding requirements from the owners of non-principal private residences. The report states that contributions to local authority services, such as those relating to local roads, libraries, parks, etc., should be secured from the owners of investment properties and other residential properties that are not principal private residences. The report indicates that the imposition of a levy would score very highly in terms of accountability, efficiency and equity. It states:

At present, owners of such properties currently benefit from services provided locally which are funded from general taxation. Ensuring that these property owners make a contribution to these services is accordingly an equitable measure.

There is no doubt that there is a need to give local authorities the option of imposing a charge and to allow them to decide what the level of that charge should be.

The Minister of State will, when replying, refer to the local government fund, the buoyancy in rates, etc. However, the stark reality is that local authorities are encountering serious difficulties in trying to provide services as a result of a lack of funding. In the past year which was accounted for, a total of €2 million was unrecoverable by Donegal County Council, not through a lack of efficiency but because of the economic circumstances which exist. Companies are going to the wall and it is difficult to apply rates. A €100 charge on holiday homes in Donegal could bring in enough money for the county council to introduce a rates freeze or to put the money into services. I look forward to the Minister of State's reply and I hope he takes it seriously, as I am sure he will.

Photo of Tony KilleenTony Killeen (Clare, Fianna Fail)
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Gabhaim buíochas don Seanadóir Ó Dochartaigh as ucht an ábhar tábhachtach seo a ardú. First, I will outline the level of support the Government provides to local authorities. The introduction of the local government fund in 1999 has been successful to date. The fund is ring-fenced for local government purposes. In 2007, a total of approximately €948 million in general purpose grants was provided to local authorities from the local government fund.

General purpose grants are the contribution the Department makes to local authorities to meet the gap between the cost to them of providing an acceptable level of day-to-day services and the income they obtain from other sources. The amount provided this year represents an increase of 8% over the amount provided in 2006 and is 180% above the amount provided in 1997. In other words, these grants have almost trebled in this time and are five times greater than inflation in the period. They contribute approximately one-fifth of local authorities' current expenditure requirements in 2007.

This increase in general purpose funding is a clear signal of the Government's commitment to the local government sector and recognition of the importance it attaches to local democracy. The local government fund also provides significant funding to local authorities for the improvement and maintenance of non-national roads. In 2007, total grants of €607.5 million have been allocated to local authorities for non-national roads. These grants have increased by almost 9% over the level provided in 2006 and by 180% on 1997 levels.

The increase in general purpose and non-national road grant allocations are well ahead of inflation and by any yardstick represent significant strides in placing local authority financing on a firm footing. The increases in support provided to local authorities from the fund in recent years have limited the direct financial contribution required from local sources from rates and charges.

In 1993, rates contributed approximately 17% of the total income of local authorities. Today, the figure is closer to 12.5%. When local authorities adopted their budgets for 2007 at the end of last year, my Department specifically requested that local authorities should exercise restraint in setting any increases in commercial rates and local charges for the year to support competitiveness in the economy and to protect the interests of communities.

The response to this request was positive and, to a large degree, local authorities exercised significant restraint with increases generally of a lower order than in previous years. Limerick City Council in its 2007 budget adopted a reduction of 1% in its annual rate on valuation. This was on top of the decrease of 0.5% in 2006. The annual rate on valuation for Dún Laoghaire-Rathdown County Council and Nenagh Town Council were not increased in 2007.

In addition to grants from the local government fund, the Exchequer provides significantly increased funding to local authorities towards infrastructure provision in areas such as roads, housing, water and waste water services. In the past decade, the substantial level of resources provided to local authorities through central funding and the fruits of economic success have resulted in a trebling in local authority expenditure. This has enabled local authorities to take a leading role in the development of economic and social life in this country. Equally, local authorities must ensure full value for money for the resources invested and seek the maximum efficiency across their operations. Much has been achieved in recent years on the efficiency and value for money agenda, including new financial management systems and annual service indicator reports.

However, we must look to the future and, to borrow a phrase, a lot has been done but there is more to do. The Government is fully committed to the pursuit of further efficiency in local government and we want to see full value for every buck spent. We work in partnership with local authorities to build on progress in this area and to develop the efficiency and value for money agenda further. In partnership with local authorities, we will implement a new costing system for the local government sector and strengthened audit committees will be established in city and county councils. These initiatives will provide local authorities with further tools in the drive for increased efficiency in their operations.

The funding available to local authorities from local sources increased rapidly in recent years as a result of the sensible economic policies pursued by the Government. Rates income from the greatly strengthened commercial base supported by the Government's successful economic policies continues to provide significant buoyancy in funding to local authorities. Local authorities need to have adequate funds at their disposal to provide their customers with quality services and to meet the demands for additional services which an increasing population and an expanding economy require.

I will seek to maximise the funding available to local authorities through the local government fund in 2008 and I am confident that this extra funding, together with the funding local authorities receive from existing local sources, will enable local government to continue to deliver an acceptable level of service to the households, communities and businesses they serve. In the circumstances, there are no plans to introduce a levy on holiday homes along the lines suggested by Senator Doherty.

Photo of Pearse DohertyPearse Doherty (Sinn Fein)
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I thank the Minister of State for his response. However, I am disappointed with it and the Minister of State addressed the issue of holiday homes only in the last line. Why will the Government not introduce a levy on holiday homes? Does the Minister of State concur with the sentiments of the Indecon report that it is fair and acceptable that those with holiday homes or second homes throughout the State should pay for the services provided by Donegal County Council and other local authorities? Doing so would widen the finance base for local authorities to provide not only acceptable levels of services but also quality levels of service.

Photo of Tony KilleenTony Killeen (Clare, Fianna Fail)
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There is a strong case in equity for pursuing the point made by Senator Doherty. However, any changes in the funding of local authorities ought not to be conducted on a piecemeal basis and ultimately will be conducted through an overall approach.