Clare Daly (Dublin Fingal, Independent)
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1066. To ask the Minister for Housing, Planning, and Local Government if it is Government policy to encourage city and county councils to apply for European Investment Bank loans which are subject to interest for capital projects rather than having Exchequer funding made available to them for same; and if this policy is being pursued to keep capital investment by city and county councils off balance sheet. [12936/18]

Eoghan Murphy (Dublin Bay South, Fine Gael)
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The elected members of local authorities have direct responsibility in law for all reserved functions of the authority, including adopting the annual budget and authorising borrowing, and are democratically accountable for all expenditure by the local authority. It is a matter for each local authority to determine its own spending priorities in the context of the annual budgetary process, having regard to both locally identified needs and available resources. In this context, the reference to available resources includes having recourse to borrowing and it is a matter for individual authorities to decide the purpose for which it wishes to borrow and the preferred lender.

My Department is responsible for monitoring the local government sector’s overall compliance with fiscal rules set out as part of the management of the Stability and Growth Pact. These include the contribution of the local government sector to the General Government Balance and controls exercised under the Expenditure Benchmark requirements.

Arising from the Government’s effort to meet commitments in relation to the general government deficit limit, local authorities have been directed that, similar to their revenue account activity, capital expenditure should not exceed capital income within the reporting year. The precise manner in which capital and current accounts are managed in order to achieve the overall balance necessary is a matter for individual local authorities themselves.

However, within these overall limits, there is capacity for the expenditure of built up capital balances and own resources, or expenditure supported by borrowing, which must be sanctioned by the Minister with policy responsibility for the specific programme involved.  In reviewing requests for sanction, consideration is given to ensuring that priority infrastructural investment can proceed, that contractual commitments and on-going projects can proceed; and that development contributions already collected and aligned to specific capital projects can be utilised efficiently. 

The term "off-balance sheet" is understood to mean activity which is outside of general government and therefore does not add to general government debt or impact on the general government balance.  As local authorities are classified within the general government sector, local authority borrowing from third parties, such as the EIB, increases general government debt.  Regardless of the source of the funds, once spent by local authorities (when the transaction is with a non-general government counter party), such expenditure is generally counted as general government expenditure and impacts on the general government balance.

It is possible that investments in capital and infrastructural projects may be undertaken in an off-balance sheet manner, e.g. public private partnerships, which are subject to specific features and conditions. The classification of such investments is a matter for the Central Statistics Office.

Against the background of the affordability pressures which exist in the rental market, particularly in cities and other major urban areas, the Government is determined to make cost rental a major part of the Irish housing system. To this end, a number of pilot cost rental projects are currently being progressed in Dublin and, in parallel, discussions are ongoing with the European Investment Bank to leverage its experience and knowledge in developing and supporting cost rental and other affordable models, with a view to developing further projects in Ireland.